How to Plan for Rising Healthcare Costs in Retirement

As you get older, you’re likely to be impacted by increased healthcare expenses for a few reasons. First, you’re more likely to face health problems, and that means you’ll probably need more care. Second, costs are continuing to rise, so the healthcare you need in the future will probably cost more than the healthcare you need today — maybe a lot more.

You’re going to need to allocate a good amount of your retirement budget to cover healthcare expenses. How can you reduce healthcare costs? Here are some things you can do to help.

Put Money in a Health Savings Account

If you’re working and you’re eligible to contribute to a health savings account (HSA), try to put in as much as you can. You can make contributions tax-free, they grow tax-free and your withdrawals are tax-free if you use them for qualified health expenses. 

With all those tax benefits, an HSA is a powerful tool when it comes to how to control the rising cost of healthcare.

Focus on the Costs You’ll Face Before Age 65

At age 65, you can qualify for Medicare. If you retire before then, you’ll need to decide what type of health insurance you need and how you can afford it. You’ll want to see how you can lower healthcare costs by considering these options:

• Add coverage for yourself to your spouse’s health plan. This may be an option if your spouse is still working. You’ll most likely have to pay for this health insurance, but it may be your most affordable choice.
• Buy private insurance on the public marketplace. You may qualify for federal subsidies to help pay for these plans offered by private insurance companies.  While some subsidies are slated to expire, there are still a lot of subsidy dollars available if you qualify.
• Continue coverage through COBRA. You might be able to stay on your employer’s health insurance plan, but most companies do not subsidize retiree insurance so you will likely have to pay the full amount.

Do the Medicare Research 

Your Medicare enrollment period starts three months before you turn 65. You’ll want to understand the different types of Medicare policies to see what best meets your needs:

• Part A helps cover hospital costs, hospice, and home health care after your deductible.
• Part B helps cover outpatient care, health services, home health care, durable medical equipment and many preventative services. 
• Part D helps cover prescription medications.
• Medicare Advantage plans (also known as Part C) are Medicare-approved plans from private companies that bundle Part A and Part B, and oftentimes Part D.
• Medigap policies are private policies you can buy to pay for costs that Medicare doesn’t cover.

If you or your spouse are still working at age 65, you can look into whether it’s better to stay on employer coverage or switch to Medicare. You can switch to Medicare when you’re older during a special enrollment period, but there are requirements you will need to meet. 

Understand Health Spending in Retirement

Couples age 65 who are retiring today can expect to spend an average of $330,000 on healthcare costs. Oftentimes these expenses hit later in retirement, so making a plan to ensure you’re covered is critical. 

See if Your Retirement Is on Track

Whether you’re still working and saving for retirement or you’re retired and managing your budget, it’s important to know if your healthcare costs are under control. Contact Farm Bureau and have a professional review your goals and financial situation so you can be ready for the future.