6 Tips for How to Navigate Healthcare in Retirement

Retirement, although known as the golden years of your life, can also come with some unsettling aspects, such as old age. If you retire in your 60s, you might already have some health issues. As you age, the chances of suffering from certain health issues further rise in retirement. With time, these health concerns can only aggravate and lead to bigger bills. Even with no major health issues, a regular visit to the doctor or buying over the counter medicines can result in high costs over time. Moreover, an unannounced medical emergency can drain your savings fund in a short amount of time, forcing you to compromise on other aspects of your life. Hence, it is crucial to plan for your healthcare expenses in retirement along with other expenditures from a young age.

Fortunately, there are many ways that can help you cover your medical expenses. Health Savings Accounts (HSA), health insurance, long term care insurance, etc. are some common tools that most retirees use to cover their medical expenditure. Staying healthy and being mindful of your lifestyle habits are some other ways to ensure lower medical costs later.

This article talks about six tips that can help you use these tools and others to navigate healthcare in retirement. Read on to know more.

• Do not combine healthcare expenses with other expenses while planning for healthcare in retirement:

One of the biggest mistakes that most people commit while planning for their retirement is to club their health expenses with other heads, such as an emergency fund, home renovation money, daily expenditure fund, etc. The idea behind this is to assume that all of these expenses will not arise at the same time and you can easily use one of these to cover medical costs. While it may be rare for all of these expenses to crop up together, it is not altogether impossible. You could have a family emergency, a dire need for home repairs, and medical issues all at once, rendering your savings as insufficient. Hence, when you plan for your future needs, keep medical costs as a separate head. Even if you have a healthy gene pool and no history of major illnesses in your family, you must still always plan for medical expenses. With changing lifestyles, increasing pollution levels, and stress, a lot of people are now being diagnosed with lifelong ailments.

Moreover, if you save prudently, you can also use these funds for a spouse or a child at a later stage. A financial advisor can help you ascertain the target that you should aim for to save, keeping in mind inflation. You can also use an online health expenses calculator.

1. 1. Understand what Medicare entails while planning your retirement medical expenses:

Medicare is a government-run medical insurance program for the citizens of the country. A lot of people think that Medicare can be adequate to meet all their retirement medical needs. However, Medicare may not always be suitable in every condition. Some Medicare plans may not cover dental issues. Long term care needs are also outside of Medicare’s gamut.
Here’s how Medicare can be used:

1. 1. • Part A covers in-hospital expenses at a hospital or nursing facility.
      • Part B covers in-patient services along with some other outpatient expenses too, such as ambulance costs, chiropractic services, medical equipment, mental health services, preventive screening, and more.
      • Part C includes Medicare Advantage plans. These plans are offered by private companies that have been approved by Medicare. Part C is a combination of Part A and Part B, but it also covers dental and vision-related medical costs, and more.
      • Part D covers prescription drugs and is offered by private companies like Part C.

It is important to know which of these plans is ideal for your needs. Taking insufficient coverage would not offer you the services you desire and can create an inconvenience in your hour of need.

1. 1. Opt for a wholesome health insurance plan to secure your healthcare in retirement and save money:

Health insurance is a necessity but there are various types of plans out there and it is important to pick a policy that is suitable for your unique needs rather than picking a general plan. For instance, even with a Medicare plan, you would need a long-term care insurance plan. While such plans can be costlier than traditional Medicare plans and even other health insurance products, they are crucial to navigating healthcare in retirement. Long term care insurance policies provide you with a monthly allowance for a said period of time to take care of your daily expenditure, home care needs, and more. These plans can be critical at a later stage in your life as you might need round the clock care at home instead of hospitalization. If you have a health insurance plan that only covers hospitalization, you would have to ultimately dip into your savings pool.

It also helps to purchase a long-term care insurance policy early in life. When you are young, the insurance premiums are a lot more affordable, compared to when you are older. However, not a lot of people like to think of their long-term care needs so early in life. This is why most people end up paying hefty premiums at a later stage. But purchasing a long-term care insurance plan at a young age can be one of the best things you can do to secure your retirement and save money.

1. 1. Take an ACA plan to cover medical expenses in retirement:

The Affordable Care Act (ACA), also known as Obamacare, came into force under the Barack Obama government in March 2010. This act aims to provide healthcare at affordable rates to all people. The most significant benefit of this act was to make health insurance available to people with pre-existing illnesses. The ACA can help the lower-income groups buy a health insurance plan and cover their retirement medical expenses to a great extent. Moreover, the act covers ten essential services including, hospitalization, maternity care, prescription drugs, preventive and wellness visits, mental health issues, outpatient care, and more. The ACA has also made prescription drugs more affordable that has particularly benefited retirees as old age can increase your usage of such drugs.

1. 1. Use a Health Savings Account to make tax deductible contributions every year towards healthcare expenses in retirement:

As the name suggests, an HSA is a healthcare plan. The plan allows you to make tax-deductible contributions every year. HSA can be a great tool to cover healthcare expenses in retirement while saving taxes. Qualified withdrawals from an HSA are tax-free and penalty-free after the age of 65. Moreover, you can keep your funds in an HSA for as long as you want. There are no mandatory distributions like required minimum distributions (RMDs) for other retirement accounts. Moreover, you can open an HSA account with your employer or by yourself.

The HSA contributions can differ each year. There are also catch up contributions that can be used to contribute more to the account. As of 2021, you can contribute $3,600 individually and $7,200 as a family. People over the age of 55 can also make catch contributions of up to $4,600 individually and $8,200 as a family. HSA funds can be used to cover various costs, including long-term care insurance. You can also use the funds for non-health expenses after the age of 65, but you will be taxed on your withdrawals as per your income tax slab.

A tip that can help you maximize your HSA funds is to treat the account as an investment tool. You can use your HSA to invest in exchange-traded funds, mutual funds, and more. This ensures that your money grows tax-free. As compared to a traditional health insurance plan, an HSA has the potential to multiply your money with investments. Hence, you should try to take advantage of this.

1. 1. Living a healthy lifestyle can help to ensure good health and may reduce your medical expenses in retirement:

While planning ahead for the financial repercussions of medical care in retirement is essential, it is also important to take care of your health and live a healthy lifestyle in the present. The more active you are in your younger years, the more comfortable you can be in your older years. Eating right, drinking in moderation, staying away from smoking, tobacco, or drugs, exercising regularly, and leading a happy and stress-free life can be some simple yet effective ways to ensure good health for life. While you should not entirely base your financial healthcare planning on the status of your current health and lifestyle, healthy habits can certainly add to your advantage by reducing your expenses on medicines, doctor’s visits, and more.

To sum it up

Healthcare is perhaps the most significant expenditure for more retirees. While all other social expenses, such as travel, material possessions, cars, etc. gradually reduce as you grow older, your health is something that can become your primary concern with its associated expenses. Hence, it becomes vital to plan for these costs from an early stage. The sooner you purchase health insurance or the sooner you start saving for such future costs, the larger can be the savings tenure, thereby ensuring more accumulated funds in the end. So, instead of waiting for a health issue to strike you, be prepared with prudent planning so you can focus on your health and not the costs.

You can also consult a professional financial advisor in your area to know more about healthcare planning in retirement and how to best navigate these costs with ease.