Can You Afford The High Cost Of Medical Expenses In Retirement?
Most people in retirement will have less income. After all, you will no longer be working full-time, so you will probably be depending primarily on a private pension plan, social security or investment earnings to pay the bills.
But on the other hand, ideally you won’t have as many expenses to deal with. It sounds good on paper except for one crucial element. While you may be able to cut down on other expenses, medical expenses are likely to increase as you get older.
In fact, a health study conducted by Fidelity Investments revealed that a couple retiring in 2013 could expect to pay out about $220,000 to cover medical expenses during their years of retirement. (The projected amount for couples retiring later is even higher.)
That’s a lot of money for most people, so you may be wondering what you can do to cover these costs.
The Medicare Option
Medicare is the government sponsored health insurance program open to people aged 65 and over who are eligible for Social Security retirement benefits. Historically, people looking to retire thought that Medicare would be there to take care of their health care needs. And it does to a certain extent.
But Medicare was only ever designed to cover acute care that is considered medically necessary. These are things like visits to the doctor, some medications and hospitalization.
Along with the premium cost there are lots of other things that aren’t covered. What it doesn’t cover are the extras like co-pays, deductibles, and many prescription drugs. Over time these can add up.
Even more worrisome for future retirees is the fact that the Medicare plan is facing long-term severe financial challenges. Congress is seriously considering significant changes in the program in a cost-cutting measure.
They are looking at increasing the age of eligibility, while also increasing premiums but decreasing coverage. If these changes come into effect, health care costs for retires will certainly increase.
The Health Savings Account Option
You may be eligible to contribute to a health savings account (HSA) if you already have a health plan with a high deductible. A HSA is a tax-free account which allows you to save and/or invest money that is intended to be used to pay medical expenses. Contribution levels vary depending on a few different factors.
You can’t continue to contribute to an HSA once you enroll in Medicare. But you can pay for medical expenses not covered by Medicare, without paying tax on the money you withdraw from your HSA.
The Long-Term Care Insurance Option
Since Medicare does not usually cover long-term care (either in your own home or in a nursing home) involving help with daily living activities like dressing or bathing, you will need to take care of this in another way.
The cost of getting assistance with these tasks can quickly eat up a huge portion of your retirement savings. A better option may be to pay for long-term care insurance (LTC). It won’t be cheap but it’s much more cost effective in the long term. You can use your HSA to pay LTC premiums. Be sure to enroll as soon as possible if you’re over age 60.
Even if you were very committed to saving a significant amount of money while you were still working, chances are that you would still not have enough saved up to live comfortably and cover all your medical expenses too.
Enrolling in Medicare, contributing to an HSA and having LTC can all help to reduce your health care expenses. But you still need to be prepared to pay a significant portion of your medical costs.
It’s a problem because the older you get, the less able you are to go out and earn to cover these extra expenses. Wouldn’t it be nice to be able to make more money without having to go out and get a traditional job, (even if anyone would hire you)?
Now might be the right time to find out how you can earn some extra income, from the comfort of your own home.
We’ve put together a FREE, NO OBLIGATION Special Report that will show you some different ways to create an extra paycheck to help you pay for your retirement lifestyle.
You can learn more by clicking on the link below that will take you to another page on this same website –
Or, simply put your first name and email address in the form below, and your report will be emailed to you immediately.
Please comment below, or give me a call if you have any questions or comments.