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Managing Your Healthcare Costs in Retirement

Filed under: Retirement

Active seniors having fun and running through the autumn forest

You might think retirement planning involves setting a savings goal for the future. It does, but it also involves analyzing your future living expenses, making sure you have enough money to cover them, and reducing those expenses when possible.

With health care expenses rapidly rising, this will be one of the biggest challenges to retirees in the future. To keep your budget under control, take these three steps to address health care costs now, before you even retire.

Learn the basics. Many people enter retirement without a solid understanding of the Medicare system. First of all, Medicare is not free. You will have to pay a monthly premium, although policy makers do work to keep those as low as possible. Another thing to remember is that Medicare won’t necessarily cover all of your health care expenses. You will encounter co-pays and other out of pocket expenses. Medicare also does not cover long-term nursing care in many situations, so the burden of that expense will likely fall on you.

Set a budget. If you retired today, you and your spouse could expect to spend about $266,000 on health care over the rest of your lives. Of course, that number is a national average, and your expenditures could fall above or below that amount. Many factors will impact your health care expenses, such as your health status prior to retirement, your location, and even luck. But considering that average number, will your income be able to cover it?

Make a plan. The first thing you can do now is take care of your health! Stop smoking, drink less, exercise more, and eat a healthier diet. You can prevent, or at least postpone, the development of many common health conditions.

Also, investigate all of your health care funding options, such as long-term care insurance or Medicare supplemental insurance. If you’re eligible, opening a health savings account (HSA) now will allow you to save money for future health care expenses while also enjoying some valuable tax advantages.

The main thing to remember is that preparation is key. There isn’t much any individual can do about the overall rising cost of health care, but you can take steps to manage your own expenses.