Do You Have a Strategy to Fund Out-of-Pocket Health Care Costs in Retirement?
Filed under: Managing Medical Costs, Life Events
Some of the most common costs retirees have to plan for include, among other things, housing, food, debt and tax liability. These costs can vary from person to person, depending on what kind of retirement you want to have. One cost that might be out of your hands, however, is health care.
In fact, health care is one of the largest costs retirees face. Fidelity estimates that the average 65-year-old couple will have more than $260,000 in out-of-pocket health care expenses in retirement.1 That’s a big number. And although Medicare can help cover those expenses, it doesn’t cover everything. Even with Medicare, a wide range of services and treatments aren’t covered by the program.
It’s important to stay healthy. This is especially true in retirement, and you wouldn’t want to deplete your savings paying for health care when you should be using it to fund the things you want to do. There are ways, however, to help mitigate your out-of-pocket health care expenses in retirement. Below are some things to think through as you plan for your health care costs in retirement:
Contribute to your HSA.
Contributing to a health savings account (HSA) is a good way to save for out-of-pocket medical costs in a tax-advantaged way. And if you or your spouse is still working, it’s possible you may be able to open and invest in an HSA. Investments in an HSA are tax-deductible and let you contribute and grow the assets on a tax-deferred basis. Further, if the funds are used for qualified health care expenses, then distributions are tax-free.
HSAs allow you to roll your savings over from year to year, too, meaning you can save money today for out-of-pocket expenses you may face in the future.
Supplement Medicare.
While the Medicare program covers a lot of medical expenses, it doesn’t cover everything. For instance, Medicare Part A covers hospitalizations, and Medicare Part B covers visits to the doctor. The program, however, typically covers only 80 percent of these costs. What’s more, traditional Medicare doesn’t cover prescription drugs, treatment overseas, dental, vision, hearing and many other things.
You can, however, supplement your Medicare to get more coverage. It is possible to fill the gaps with things like a Medicare Advantage policy or a Medigap policy. Both of these options can provide more coverage and protection.
Evaluate your needs yearly.
Your medical needs could change from year to year. You might need more coverage, or you might need less coverage. Whatever the case, Medicare has an open enrollment window every year, and you can use this time to adjust your coverage.
It’s also important to keep in mind that Medicare coverage is individual coverage, not family coverage. This means it might be a good idea to review your needs independent of your spouse’s needs.
Not sure how to manage your healthcare costs? Let’s talk about it. Contact us at Ambrose Financial & Insurance Services to learn more. We welcome the opportunity to help you examine your needs and develop a strategy. Let’s connect soon and start the conversation.
1https://www.fidelity.com/about-fidelity/employer-services/health-care-costs-for-couples-in-retirement-rise
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16240 – 2016/11/15
