A Retirement Planning Advisor Explains Medical Expenses and Retirement Plans
While, you might not expect to discuss the topic of medical expenses with your retirement planning advisor you should. While you are working, healthcare falls under employer-sponsored plans. Also, with your paycheck arriving every month, medical expenses just join a long list of other bills to pay.
But in retirement, there is no monthly paycheck. And there is no employer-sponsored plan. So, right at the time you stop having a supply of new cash every month, your healthcare expenses go up a lot.
The conversation with your retirement planning advisor about medical expenses focuses on several universal issues:
- How to plan for increased medical expenses
- A plan for comprehensive health insurance in retirement
- Medicare is seldom adequate health insurance
Many other issues might come up in discussion based on your unique situation, but these are universal issues.
How to plan for increased medical expenses – Advice from a retirement planning advisor
Healthcare costs continue to rise, and out-of-pocket expenses are increasing even more quickly. Estimates suggest that if you and your spouse retired recently, you could need $285k in after-tax funds to pay for your health care costs in your retirement years. Unfortunately, many retirees end up using their travel and leisure budget to pay these medical expenses.
Not retiring until you have had your 65th birthday means you’re eligible for Medicare, which lowers your health care expenses. Also, you might be able to defer your Social Security payments. This means your monthly amounts will be larger, taking more pressure off your savings. And long-term care is in addition.
With several Medicare coverage options, you can choose what is right depending on your situation. One element of Medicare covers hospital visits, another covers prescription drugs, and other sections cover preventative care. But while the government helps, Medicare is not free. You have to pay your premiums, and there is no vision or dental coverage. Get advice from a retirement planning advisor to determine an estimate for how much your situation is likely to cost.
A plan for comprehensive health insurance in retirement
The estimate is bound to depend on your health and other aspects of your personal situation. But a retirement planning advisor trained in the intricacies of Medicare and tax planning is in the best position to estimate.
Let’s say you retire on your 65th birthday, and you live in retirement for another 30 years. You’ll need a plan to pay for those 30 years of medical costs, keeping in mind that your other expenses will be highest, as will your medical needs and healthcare costs. It makes good sense to specifically save for your medical needs during retirement. Have this discussion with your retirement planning advisor as soon as possible, so you can develop and implement a plan.
Medicare is seldom adequate health insurance
Medicare covers a reasonable portion of your medical expenses, but not nearly all of them, and frequently, not nearly enough. Medicare doesn’t cover all of your medical expenses, and you still pay premiums. Most retirees find purchasing either a Medicare Supplemental Plan or Advantage Plan to be in their best interests. Just like other insurance programs, though, you are the one who pays the premiums. But Medicare is run by the government, so few customizations and options are available like those on the private medical insurance market.
Key takeaways from your retirement planning advisor
Accept that once you retire, you will need to fund more medical expenses. This is partly because we need more care as we age and partly because employer-sponsored programs are not available. Begin a saving plan now with the advice of your retirement planning advisor, who knows your personal and financial situations.