How to Plan for Rising Healthcare Costs in Retirement

Managing Your Retirement: Tips for Rising Healthcare Costs

Retirement brings a plethora of emotions, ranging from excitement to worry and everything in between. While there is much to look forward to in retirement, there are also legitimate concerns shared by many new retirees — rising healthcare costs being one of them. In this article, we provide five tips for effectively preparing your finances for upcoming healthcare costs both pre- and post-retirement. 

Tip #1: Understand the Numbers of Rising Healthcare Costs

Concerning healthcare costs, it’s imperative to know and understand what kind of costs to expect from any future appointments or diagnoses. To figure out the actual cost, you need to take into consideration your retirement location and tax rates. Each state has a different tax regime, which can greatly influence your social security benefits. 

Related: Less House, More Home: Mortgage-Free Before Retirement

Evaluate Your Taxable Accounts

Your next step is to evaluate your taxable accounts. Like most retirees, you may have an IRA account, which can’t be accessed before a certain age without penalty. If you need to withdraw money early to cover certain healthcare expenses, using a taxable account will result in fewer IRS penalties, as well as greater access to the money that is rightfully yours.

Keep Inflation in Mind 

Inflation should always be taken into account, regardless of the circumstance. Since it’s on the rise, it’s wise to learn about the various factors that can help you save some money when planning to cover future healthcare expenses. 

Estimate Future Healthcare Costs

Lastly, you should estimate realistic costs of future healthcare needs based on your current health and possible long-term care expenses. A thorough evaluation of all of these factors will allow you to approximate a figure close to your projected healthcare costs. In doing so, you will be more equipped to handle sudden healthcare costs, as well as worry less about anticipated expenses.

Tip #2: Consider the Premiums

In most cases, if you have company-sponsored health insurance, your premiums are not reflected in their entirety, since your employer pays for a large percentage. In addition to the out-of-pocket costs, it’s crucial to know the full cost of the premium when you’re considering early retirement. Knowing this will ensure that you’re prepared to maintain your policy. 

Depending on your qualifications, you may also pay different Medicare premiums, such as:

  • Medicare Part B
  • Medigap
  • Advantage Premiums (Medicare Part C)
  • Medicare Part D Coverage
  • Long-Term Care Insurance Premiums

Since you will not be eligible for Medicare until you reach 65, you should prepare for this expense as soon as possible. There will be a range of associated costs, so make sure you do your research. After you figure out what you are eligible for and your premium cost, you can aim to save the necessary amount, allowing you to pay for miscellaneous expenses and afford future healthcare expenses.

Set Up and Utilize an HSA Account

HSAs, or Health Savings Accounts, are used to store pre-tax savings for qualified medical expenses. Therefore, you can apply it toward deductibles and co-payments, as well as other costs to lower your overall healthcare expenses. This can be useful during unexpected medical emergencies. 

In order to qualify, you must have a high deductible insurance plan, be uninsured by Medicaid or Medicare, and not be listed on anyone’s tax return as a dependent. HSAs provide you with a way to manage the money you save for future health needs. Most notably, HSAs have no expiration date, so you can use your money however you see fit.

Tip #3: Maintain Health Insurance

You will have to maintain your current insurance policy until you qualify for Medicare, despite when you begin to plan for retirement and rising healthcare costs. Keeping your current plan ensures that you do not accrue any penalties and that you have coverage should Medicare take some time to kick in. Medical emergencies can happen without warning, which is why it’s wise to ensure your coverage is always up-to-date.

Tip #4: Visit the Doctor Regularly

Monitoring your health is vital, as it not only helps you predict future healthcare costs but also ensures you’re aging gracefully in your golden years. Regular doctor visits work to prevent expensive medical bills from untreated illnesses and grant you the freedom to enjoy retirement to its fullest. Plus, staying on top of your health will give your loved one’s peace of mind as you phase into retirement. 

Tip #5: Monitor Your Retirement Income

Retirees typically earn between $24,000 and $26,000 annually. The amount you earn can vary greatly based on your age, as older retirees earn less. As a general rule, you should save at least 70% of your income before retirement in order to compensate for the loss of income you will experience in retirement. However, if you have started saving later in life, there is still room for improvement. Unsure if you’re ready to retire? Click here.

Utilize the amount of income that you will be bringing home to calculate your monthly expenses and savings. Then, determine how much of that income will be taxed. If you live in a high-tax state, be sure to check the specific tax rate for your state. 

Did you know? South Carolina does not tax social security, and only partially taxes withdrawals from retirement accounts. The Palmetto State has one of the lowest state tax rates in the nation, making it one of the most tax-friendly states in the country for retirees.

Choose Seafields for Your Post-Retirement Oasis

When preparing for rising healthcare costs, it’s important to consider all the facts. Retirement is about enjoying your free time and living in luxury, so worrying about health expenses should be the least of your worries. With the rising cost of healthcare, mortgages, and other monetary requirements, an independent living community can relieve some stresses of homeownership and enable you to do what you love. 

At Seafields at Kiawah Island, vetted and qualified staff provide a range of luxurious amenities as well as structured care and consideration. Our luxury independent living and assisted living Life Plan Community provides residents with a luxurious lifestyle, personalized leisure, and comfort. To learn more about retiring at Seafields, please contact our team by clicking the button below.