Are you making final planning decisions for your retirement? Perhaps you’re considering when to leave your career or when to file a claim for Social Security benefits. You might be finalizing your investment strategy or thinking about downsizing to a more affordable home.
It’s important to use this time to consider every possible risk you may face in retirement. Once you retire, you may have limited options to minimize risks. One threat you shouldn’t ignore is out-of-pocket medical bills.
Many retirees assume that Medicare pays for all health care costs in retirement. Medicare is a valuable tool, but it doesn’t cover everything. Many services are only partially covered. Some needs, like long-term care, aren’t covered at all. In fact, Fidelity estimates that the average retired couple will spend $275,000 to cover out-of-pocket medical expenses.1
If you haven’t included medical costs in your retirement budget, now may be the time to do so. It could have a significant impact on your retirement. Below are a few tips on how you can cover your medical expenses without impacting your lifestyle in retirement:
Maximize contributions to a health savings account.
A health savings account, also known as an HSA, can be a powerful tool to cover medical costs in retirement. You can contribute up to $3,450 as an individual or as much as $6,900 as a family to your HSA in 2018.2 These contributions are tax-deductible.
You can invest your HSA contributions according to your goals and risk tolerance. You don’t pay any taxes on growth as long as the funds stay in the account. When you’re ready to use the funds for qualified health care costs, you can take tax-free distributions.
Many people assume that HSA funds have to be used within a calendar year, but that’s not accurate. You can accumulate HSA assets into the future, even after you retire. You can then use those tax-free funds to cover your retirement health care costs, including premiums, deductibles and even long-term care costs.
Consider a supplemental Medicare policy.
Medicare offers multiple coverage options to cover a variety of budgets and needs. The most basic package covers hospitalizations and some visits to doctors. However, you can also choose other types of Medicare to reduce your co-pay or even to cover prescription drug costs. Medicare offers an enrollment period every year to make changes to your coverage.
You also may want to consider a supplemental policy through a private insurer. These policies integrate with standard Medicare, but also offer additional protection. Some supplemental policies reduce your deductibles or copays while others offer coverage for services not usually included in traditional Medicare, such as rehabilitation, dental and vision, and even prescription drugs.
Think about purchasing long-term care insurance.
The U.S. Department of Health and Human Services estimates that the average 65-year-old has a 70 percent chance of needing long-term care at some point.3 Long-term care is extended assistance with basic living tasks such as eating, mobility and bathing. It’s often provided in the home or in a facility.
As you might expect, long-term care can cost thousands of dollars per month and is sometimes needed for years. It’s also not covered by Medicare, so if you don’t have a plan in place, it can drain your retirement savings.
Long-term care insurance can help you offset these costs. You pay either a one-time or an ongoing premium. In exchange, the insurance company pays some or all of your costs if you ever need long-term care. Many policies will cover care provided either in a facility or in your own home. It could help you get the care you need without depleting your savings.
Ready to develop your retirement health care strategy? Let’s talk about it. Contact us at Legacy Retirement Services today. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
17282 - 2018/1/17
Terry L. Tyler