As with everything financial, careful planning is the key to maintaining stability and relieving the stress that comes with expenses and managing money. This is especially true for those entering retirement whose money situation will change drastically. 

One of the major financial commitments you have going forward is your healthcare as you age. It's very important you plan for expenses like retirement insurance and rising healthcare costs. As you age, this becomes a crucial step toward maintaining financial stability throughout your life. 

Prepare Financially for Anticipated Healthcare Costs 

Most people won't take the rising costs of healthcare into account when they start to put together a retirement plan or start to put theirs into practice. The costs of healthcare and affordable long term health insurance are two considerations that should be large parts of your financial plan.

When you retire, you lose your income and the insurance that typically comes from your employer, thus increasing healthcare costs and reinforcing how important it is to plan for them. For most, social security will only make up around 40% of their lost income depending on when you decide to start accepting those benefits.

Key Decisions to Make For Healthcare Retirement Planning 

As you get older, there are many important decisions you'll need to make that will have an impact on your retirement and healthcare planning.

  • When should you stop working? Deciding when to retire is probably the most important decision you'll make because it impacts how much money you'll need saved for healthcare. The longer you work, the less time you need to prepare for in retirement.
  • When should you claim social security? The longer you wait to start accepting social security benefits, the higher your benefits will be. If you think you need social security sooner, you must take that into account when planning your healthcare expenses for the rest of your retirement. Knowing how long it will take to make up the foregone income from deferring your payments can be an important factor when creating your social security claiming strategy.
  • What type of retirement insurance should you get?  Decide if you want to maintain private insurance, pay out-of-pocket with savings or income from pensions and social security, or choose a Medicare or government healthcare plan.

Your ideal healthcare strategy depends on your answers to these questions.

Rising Healthcare Needs and Costs as You Age

Along with the rising costs of actually getting healthcare services, your general year-to-year medical expenses will naturally rise as you age and require more attention dedicated to your health. There are also a lot of large medical costs you'll run into as you move through retirement that many forget about or fail to plan for, such as:

Retirement Homes/Nursing Homes: If you decide one day that you'd like to move into a care facility like a retirement home, you need to realize how much it costs and if you have the budget. The monthly cost of a typical care facility ranges between $1,500-$10,000 a month depending on what type of facility you choose (nursing homes, retirement homes, independent living communities, etc.) and how much medical care you require.

You don't want a decision like this to come down to money in the future so it's best to plan ahead with proper healthcare planning.

Additional Medications/Prescriptions: Your typical spending on medications will rise as you age. There are services in place (like Medicare) to help cover the cost of increases in prescriptions, but the average person will still end up paying more for medications during retirement than in your entire life before.

What are HSAs and Should You Have One?

An HSA—or 'Health Savings Accounts'—is a tax-advantaged savings account used specifically for medical or health expenses. These can be a good way to set aside income over the course of your life to save up for future medical expenses, but not everyone meets the qualifications needed to get an HSA.

To qualify for an HSA, you must be a part of what the IRS calls a 'high deductible insurance plan' (HDIP). The exact definition of an HDIP changes often, but you can check on HSA-eligible plans and the current HDIP numbers on the IRS website.

While an HSA is a good option if you qualify, many simply never will, especially if you rely on insurance from an employer whose plan doesn't meet the requirements. 

What About Medicare?

Medicare is the US government's medical services program for those 65 years or older. It comes in three major parts which each cover different aspects of healthcare:

Part A: Hospital insurance to help seniors manage the high costs of hospital visits, treatments, and procedures.

Part B: Medical insurance that covers health care costs not covered by Part A like doctor visits, outpatient hospital care, physical therapy, testing, and medical equipment.

Part D: rescription drug coverage to assist in paying for the rising costs of prescription medications for seniors.

Each part of Medicare covers different parts of health care and has varying premium costs depending on many financial factors.

Don’t Overlook Your Financial Planning | Rely on The Experts at Park Place Financial

Healthcare retirement planning is an often-overlooked aspect of financial planning that leaves many wishing they had thought ahead when it comes to rising medical costs. Don’t let your retirement expenses catch you by surprise. Start being proactive and schedule a free consultation with our team at Park Place Financial to discuss the plan for your future health care costs.