How To Plan For Medical Expenses in Retirement

If you are near retirement, it’s time to face the big elephant in the room: medical expenses. Health care is costly, so it’s better to plan to enjoy this next phase of your life fully. Before going into the mechanics of what you’re going to do with your time, it’s crucial to have a firm grip on your finances to carefully and strategically plan your retirement.

While the best time to start preparing for it is the very first day of your workforce. But only some people follow this path. Here are some tips for a safe, secure, and fun retirement.

Understand Your Coverage Options

According to Fidelity, the average 65-year-old couple will need approximately $300,000 in 2022 to cover all their medical costs. But here’s a catch: unfortunately, it doesn’t include dental, vision, or long-term care.

Many rely on Medicare to cover all their healthcare expenses only to know it doesn’t. You must understand different parts of it and what they entail. Since there is no family coverage, each individual must apply for it independently. The enrollment period lasts seven months, so sign up three months before turning 65. Take it, or else a penalty will be charged, which might ambush your financial security.

That being said, there are two parts to the original Medicare. Part A covers hospital costs and is premium-free, except for the deductible. The copay also begins if your stay surpasses 60 days. On the other hand, Part B covers medical insurance – doctor’s visits, and other outpatient services. As prescribed drugs are not included in the original plan, you can also opt for Part D – (access to medicines) additionally and take care of this.

But if you are looking for an all-in-one plan, stop here as there is a medicare advantage plan – Part C. It covers parts A to D with its doctors and healthcare services network. Remember, you can either go for original Medicare, part D, or medicare advantage, but not simultaneously.

Consider a Health Savings Account

A health savings account (HSA) is a great way to stash aside some tax-free dollars for healthcare expenses before Medicare. Think of it as an asset you’re fueling up until the right time comes – retirement.

This savings account is available with high-deductible health plans. You can use it for copays, coinsurance, and certain medical premiums. The money can grow without taxes; even distributions are tax-less if withdrawn for qualified medical expenses after turning 65.

If you withdraw the money for non-medical purposes before retirement age, you’ll have to pay the tax and a 20% penalty fee. But you can take the money out for whatever reason after your retirement period starts, according to SSA, even if it’s non-medical.

So it’s better to invest in a health saving account from day one of your work to ensure the golden years of your life in old age. Save as much as you can before your retirement begins because you can no longer contribute once you hit it.

Budget for Long-Term Care

Adversaries do not knock when they come; therefore, it’s imperative to save money and budget accordingly. Since it is not covered by medicare or medicare advantage, it can be financially and emotionally draining.

You may require assistance and supervision if you can’t take care of yourself and do basic activities like bathing, dressing, changing clothes, etc. Certain medical illnesses, cognitive conditions, or brain disorders like Dementia and Alzheimer’s present a need for a qualified person to take care of all your needs. Other diseases or injuries, such as a broken hip or a stroke, require assistance.

You can always opt for self or family funding or consider long-term care insurance. This coverage provides home health care, nursing home, and assisted living facilities. Many experts suggest you buy the long-term policy in your youth, as you get it at a much lower price than in old age.

If you plan to buy it, look for a facility where you can spend the remaining years living in contentment. St. Dominic Village is a top-notch senior care center that offers multiple levels of care and floor plans that fit your needs and choose the one that fits your needs.

If you don’t want to go with this, there is another option -Annuities. It’s a contract between you and the insurance agency. You make a series of payments or lump sum and are eligible to receive regular disbursements. Consult your financial advisor to plan for long-term care in retirement.

Plan Ahead in Retirement Savings

It may seem absurd to plan about your old days at the start of your career, but if you want your retirement years to be golden, you should start right now. Figure out your long-term goals and what you want to do in your life later, as it will determine the cost you may require to manage the expenses.

Find out if your company offers a retirement savings plan such as 401(k), and invest as much as possible. The tax will be lower, and compound interest can be significant over time. If your company has a pension plan, check to see if you are eligible. Ask for an individual benefit statement to know what is there. The Individual Retirement Account (IRA) is a great way to save money.

Plan Today for a Comfortable Tomorrow

Healthcare expenses can be challenging during retirement. So make sure you’re planning strategically to avoid any unpleasant surprises in the future. It’s good to start as early as possible and review your plan time to enjoy the retirement you’ve always dreamed of.

It’s vital to strike a perfect balance between realistic and unrealistic expectations regarding the desired standard of living. Follow these tips and consult your family members and advisor to create an ideal plan for your old age.

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