What Is Healthcare Planning?
Figuring out how your healthcare costs will change as you age can be overwhelming when confronted on your own. Hiring a financial advisor to assist you in long-term healthcare planning can help you develop a concrete understanding of how much healthcare may cost you.
Ways to Help Plan For Healthcare Costs In Retirement
According to HSA Bank, two-thirds of adults aged 65 and older believe that they will only need to save less than $100,000 for retirement healthcare costs. Fidelity found that men are more likely to need $150,000, while women may need upwards of $165,000.[1] To cover these costs, you will need to identify exactly how insurance benefits like Medicare or private coverage will protect you in the future.
Understanding Medicare
If you rely on Medicare to help you afford healthcare costs, it helps to understand how their policies function. Medicare is broken down into four parts; A, B, C, and D. While Parts A and B cover hospital and medical costs respectively, Part C is referred to as Medicare Advantage, and typically offers Parts A, B and D inclusively (Part D is prescription drug coverage). These advantage plans can be purchased through private insurance providers rather than through the government. If you have trouble covering the full costs of your medical expenses with your Medicare coverage, you can also invest in Medicare Supplemental Insurance plan, which will cover an additional portion of your out-of-pocket healthcare costs.
Avoid Using Retirement Savings to Afford Healthcare Services
Creating a safety net can help you avoid dipping too deeply into your savings to pay for healthcare expenses. Before you retire, you may want to create a health savings account. These accounts feature deductible contributions, tax-deferred growth, and tax-free withdrawals for qualified medical expenses. They can be used to pay for some medical premiums, like Medicare and long-term care insurance premiums.
An HSA plan will minimize the cost of your healthcare by reducing tax liability when you withdraw the money. It is important to start contributing to your HSA early because individuals can only contribute $3,850 to their HSA account annually, and they won’t be able to make contributions once enrolled in Medicare.[2]
Deeply consider what your healthcare coverage situation will be in retirement and prepare accordingly. Make sure you are aware of your current health condition and use that knowledge to inform your healthcare plan. Your financial advisor will also help you deal with unique situations, such as early retirement or complex healthcare needs.
If you choose to work with Grutz Financial, we will help you plan for a long and healthy retirement. Contact us now to get started with a meeting.
References
- https://newsroom.fidelity.com/press-releases/news-details/2022/Fidelity-Releases-2022-Retiree-Health-Care-Cost-Estimate-65-Year-Old-Couple-Retiring-Today-Will-Need-an-Average-of-315000-for-Medical-Expenses/default.aspx; Published: May 16, 2022; Accessed: Nov 17, 2022
- https://dpath.com/hsa-contribution-limits; Published: May 4, 2022; Accessed: Nov 17, 2022
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