Health care may not be something you think you have to worry about once you retire, but you are sadly mistaken. The rising health care costs after retirement can catch you off guard and accumulate quickly.
Consider your monthly cost of health care in retirement in addition to premiums, copayments and deductibles and you may find yourself in a bind. Let’s explore ways to prepare for retirement and future health care expenses.
1. Utilize Open Enrollment
Open enrollment happens every year and can save you a lot of money on your health insurance. Ensure you maximize your savings by taking advantage of the open enrollment period and applying for insurance that best fits your needs. Outside of special life events like getting married, starting a new job that offers insurance or having a baby, open enrollment is the only time you can enroll in a health insurance plan.
Employers often offer different enrollment periods based on the insurance they provide for employees and you can apply for Medicaid or Children’s Health Insurance Program any time of the year. You can apply for insurance coverage starting the next calendar year when you utilize open enrollment. For 2022, open registration begins November 1. If you enroll in a plan by December 15, your coverage will start on January 1, 2023.
2. Health Savings Account
A health savings account (HSA) is a tax-free way to save for retirement if you use the contribution on medical expenses. The funds you deposit into your HSA are pre-tax, which will lower income tax for the year. HSAs come in handy after you turn 65 to pay for out of pocket health care costs that your Medicare plan doesn’t cover like dental and vision appointments, hearing aids and prescriptions.
If your job provides insurance, you can talk to your employer about setting up an HSA. You can set up an HSA with your bank, credit union or insurance company. To be eligible to open a health savings account, you must be 18 or older and have a qualified high-deductible health care plan. You can’t keep putting money into an HSA after you enroll in Medicare once you hit retirement, but you can take money out of the account to help with health care costs.
3. Long-term Care Insurance
To plan for long-term care expenses, you can purchase long-term care insurance. Medicare can leave a gap in your health care after you turn 65, so you can get stuck with paying for things like prescriptions. Once you take into consideration your monthly cost of health care in retirement, deductibles and copayments, there’s a possibility you can be out of funds by the time your insurance kicks in.
The cost of a private room in a nursing home or an assisted-living facility can cost thousands of dollars. If you want to ensure that you’re prepared for those kinds of expenses, long-term care insurance might be worth your while. Some alternatives to long-term care insurance like group long-term care insurance, HSAs, life plan communities and home equity can help you prep for health care after retirement.
4. Pay Down Debts
One of the ways you can start prepping for retirement now is to begin paying down your debts. Your mortgage, credit card bills and loans can seem daunting on top of your monthly cost of health care after you retire. There are many ways you can tackle your debt. If you want extra income, you can begin working odd jobs like freelance writing or waitressing on nights or weekends.
You can also sell some gently used items you no longer use. There are many benefits to decluttering your home in addition to making a little extra cash. Decluttering can also help you prepare for retirement, so you don’t have much to go through once you finally get some free time. You can start decreasing your debt by paying off loans and minimizing other financial obligations. Consider getting a financial advisor to help you manage your money efficiently and make the most of your income.
5. Save Your Money
Save as much money as possible to prepare for retirement and all it offers. If your company offers a 401k, take full advantage of this program to maximize your savings. Some employers match every contribution you make to your 401k, which can substantially increase your savings. You can also get a Roth IRA to boost your retirement savings.
There are many ways you can start saving money now to prepare for retirement, such as cutting your spending costs and maximizing your savings and setting up automatic recurring deposits for a savings account. Start putting 15% of your salary in savings every month and you’ll be amazed at how fast it can accumulate.
Health Care After Retirement
Health care should be the least of your worries after retirement, but unfortunately, you must prepare for the unexpected. With proper preparation, you could be able to pay out-of-pocket expenses you simply cannot afford. Maximize your savings and find the right insurance to begin planning for retirement.
Beth is the Managing Editor and content manager at Body+Mind. She shares knowledge on a variety of topics related to nutrition, healthy living, and anything food-related. In her spare time, Beth enjoys trying out new fitness trends and recipes.