Planning for your medical expenses can be quite a task if you don’t know where to begin. The cost of healthcare in retirement can be a significant sum. After all, in most cases, trips to the healthcare provider pile up when people grow older.
Lack of medical coverage can interfere with your retirement plans as well. You might not have enough money for other retirement expenses if this is the case. This is why it’s important to plan your medical expenses in retirement.
There are many ways to plan your expenses if you’re opting for healthcare insurance. Medicare remains the popular choice among the several healthcare insurance options available today. This could be because of the vast array of Medicare benefits that retirees can avail of.
There are other ways you can plan your retirement medical expenses alongside Medicare. We’ll first talk about Medicare here and then discuss these options.
Look at Medicare Plans
The first step toward planning retirement medical expenses is thinking of the costs you’ll face. After all, your medical needs might not be the same as those of others retiring. First, you would need to break down the costs of your regular medical needs.
Then, it would be time to choose a Medicare plan to suit your needs. Medicare is a health insurance plan designed by the US federal government. The benefits of these plans include reduced cost of medical expenses in most states.
There are many types of plans available today that you can choose from. These plans differ from each other based on several factors. These factors include the state you live in and whether you’re willing to pay for an advanced plan.
You would need to be of retirement age or fulfill other criteria if you want to avail of Medicare in Texas. These eligibility criteria are pretty much the same as those for other states across the US.
The two main Medicare plans available are Part A and Part B. Part A covers hospital insurance. Part B covers medical insurance.
These expenses include the cost of prescription drugs. If you want prescription drug coverage, you’ll have to opt for Part D. Part C offers some of this coverage as well. These plans are private health insurance plans so you’ll need to pay for them.
Large states have several Medicare partners that provide patients with reduced medical costs. But, the cost of premiums for Medicare plans differs from state to state. States with more Medicare plans sometimes have higher premiums.
A good example of this would be California. Medicare in Texas is available in several centers across the state, but the premium is reasonable. Beneficiaries in the state use Medicare services every year for their medical expenses.
Prepare a Budget
It can be more than a little challenging to pay for medical care when you don’t have an insurance plan. This is especially true for those of retirement age. Such individuals usually rely on their pensions to see them through their retirement.
But, medical bills can pile up pretty quickly for those over the age of 65. Studies show that those in the US above the age of 65 pay an average of $11,000 per year in medical expenses. Now, if you have pre-existing medical conditions, you’ll likely pay a much higher sum than this.
Everything from doctor’s visits to medicines will cost you a fortune if you don’t watch out. Health insurance plans like those offered by Medicare can help you cut down on expenses. But, you may still be left with expenses not covered by government health insurance.
These expenses include diagnostics and medicines. You can opt for a private insurance plan that covers these expenses. But, you should know that the premium for these insurance plans doesn’t come cheap.
If you don’t want an insurance plan at all, you’ll need to prepare a medical budget. You would need to take out money from your pension or savings every year to cover these expenses.
You can look at your previous medical records to understand how much you’ll be paying in the future. This will help you prepare an accurate budget. Also, consider the cost of medicines and follow-up visits when preparing a budget.
If your budget is tight, don’t opt for cheaper healthcare services just to save money. This could compromise your health in the long run. Instead, re-evaluate your government health insurance options like Medicare.
Open a Health Savings Account (HSA)
A Health Savings Account (HSA) is useful for those who haven’t enrolled in Medicare yet. You can open such an account if you want to start saving for medical expenses in your retirement.
Some advantages of saving money in these accounts are:
- The biggest advantage is that you can withdraw tax-free amounts for medical expenses. But, these should be qualified expenses.
- The contributions you pay into the account are tax-deductible. So, opening an HSA won’t interfere with your retirement tax planning in any way.
- You can enjoy tax-deferred growth on the money you save in this account.
Another advantage of HSAs is that you can use them to pay for medical premiums like Medicare. So, if you want a more advanced Medicare plan, it would be a good idea to start saving money in an HSA.
It would be wise to open an HSA when you’re in your 50s. This way, you can save enough money to cover your retirement medical expenses. Also, you can use catch-up contributions when you open an account before retirement.
These contributions allow you to add $1,000 per year to your account more than the contribution limit. But, you have to be older than 55 to be eligible for catch-up contributions. Also, you cannot make contributions to your account after you enroll in Medicare.
Conclusion
The prospect of planning for your medical expenses in retirement can seem daunting. But, when you take a step-by-step approach to plan your finances, it becomes easier.
You can start by checking out Medicare plans and learning the enrollment criteria. Then, you can plan any extra medical expenses that you may have (like buying medicines). Last, you can open an HSA to start saving for the expenses you think you’ll face.
This approach will save you money and take care of your medical needs after retirement.
