30-second summary
A safe, secure retirement is a key goal for most American workers. And while for many this goal is within reach, rising healthcare costs can stand in the way of even the most well-made retirement plans.
For those on a fixed income, or who are past their prime earning years, these healthcare cost increases can take a significant bite out of your nest egg and can wreak havoc on budgets.
In this article, we’ll break down some potential healthcare costs, as well as some ways to reduce these growing expenses. As always, be sure to speak with a financial professional to discuss your specific situation.
In the United States, an average retired couple aged 65 in 2021 needed approximately $300,000 saved (after tax) to cover health care expenses in retirement, according to Fidelity Investments. As healthcare costs continue to rise, so does this cost for retired couples.
For anyone who’s not prepared, the data shows a difficult outlook when it comes to managing these expenses. However, understanding these potential costs is the first step toward developing a comprehensive retirement plan.
Facing steep healthcare bills after retiring might leave less room for enjoying hobbies or traveling like you planned. Remembering to add up all related costs is a key part of getting financially set for retiring comfortably. Enjoying retirement is a lot easier when you’re not stressing over unexpected medical bills that might pop up.
Understanding Medicare Coverage
Medicare, the federal health insurance program for people who are 65 or older, provides a level of relief. However, it doesn’t cover everything. For instance, long-term care, most dental care, and eye examinations related to prescription glasses are not covered. It’s crucial for seniors to understand the specifics of what Medicare covers and what it does not in order not to be blindsided by unexpected costs.
To address the gaps in Medicare coverage, many seniors opt for supplemental insurance policies known as Medigap. Policies like these fill in the gaps left by Medicare. They take care of extra costs including copayments and deductible amounts.
Investing in a Medigap policy can be an effective strategy for managing healthcare costs in retirement. It’s smart to explore several Medigap plans so you can select the one fitting both your medical needs and wallet. It’s important to get an insurance plan that fits perfectly—covering everything necessary yet still easy on your wallet.
Long-Term Care Insurance
Another strategy to consider is long-term care insurance. If you’re looking for coverage that includes both personal help and caregiving in different settings—be it your house, a community center, or specialized facilities—this type of insurance has got you covered for the long haul.
Paying for prolonged health services doesn’t have to drain your savings. Long-term care insurance provides a cushion against these hefty bills. Before buying a policy, it’s smart to weigh the costs against the benefits. Before choosing long-term care insurance, weigh factors such as monthly costs, duration of benefits provided by the policy, and overall coverage offered.
Health Savings Accounts (HSAs)
An HSA is like your personal piggy bank just for health-related expenses, but the best part? You don’t have to pay taxes on what you put in or take out as long as it’s used for qualified medical needs. This even applies to people whose primary insurance is Medicare.
Health Savings Accounts (HSAs) offer another avenue for saving. High-deductible plan holders can stash away pre-tax dollars in these accounts to cover qualified healthcare expenses down the line.
With an HSA, covering health-related expenses during retirement becomes much simpler and less stressful. They come with great tax breaks and allow spending across many kinds of medical treatments or supplies as needed. Therefore, contributing to an HSA during your working years can help build a financial cushion for your healthcare costs in retirement.
Lifestyle Choices
Think of every small healthy choice as an investment toward lowering your future medical expenses. From eating balanced meals to taking regular jogs around the neighborhood—the little things truly count when it comes to saving on healthcare.
Making time for fitness activities (even if it is limited to brisk walking!) each week while eating right and visiting the doctor often goes a long way in preventing big-time health scares—plus it keeps your wallet happier without steep medical charges.
By choosing a healthy way of life now—like sticking to nutritious foods and regular exercise—you’ll likely find yourself spending less on healthcare during retirement years. Small efforts today mean big savings later. When you take good care of your body and mind, it’s easier to steer clear of chronic conditions and costly medical issues down the road.
Living Your Best Life
Planning for healthcare costs in retirement is tremendously important. Knowing what’s best for your health, and healthcare, while keeping an eye on financial changes can help to set yourself up nicely for those golden years while reducing stress and minimizing surprise expenses.
Start preparing today so you can avoid high medical costs in retirement. Healthcare expenses are an important part of financial planning, and its never too early to start that journey!
As an accomplished marketing leader, I have successfully built impactful functions in diverse industries. During my career, I have translated complex systems into clear and actionable initiatives that drive growth and revenue. With a deep-seated passion for success, I foster cross-functional collaboration by leveraging my strong relationship-building and communication skills.
