Retirement can come with lots of expenses. Costs of living such as paying for food and housing, along with tax liability and any debt you’ve carried over, are all things you’ll probably want to plan for. One that’s commonly overlooked, however, is the cost of health care. And considering it might be one of your largest costs in retirement, it is probably a good idea to have a strategy for covering those costs.
In fact, Fidelity estimates the average 65-year-old-couple will have to spend $260,000 in out-of-pocket health care expenses during their retirement.1 Although Medicare is a valuable tool and can go a long way toward covering these costs, there are a number of treatments and procedures it does not cover.
You’ve worked hard for your retirement savings, and you probably want to use it to fund your lifestyle or to have something to pass on to your heirs. Below are some things to think about as you start planning your health care strategy in retirement:
Use an HSA.
A health savings account (HSA) is a tax-advantaged account that lets you save for out-of-pocket medical costs. And if you or your spouse is still working, you may be able to open an HSA plan to help cover your medical expenses in retirement.
Contributions to HSAs are tax-deductible and allow you to grow the assets on a tax-deferred basis. What’s more, all distributions are tax-free as long as they are used for qualified health care expenses.
Supplement your Medicare coverage.
Medicare is a very useful program, but it doesn’t cover all your medical expenses. While Medicare Part A covers hospitalizations, and Medicare Part B covers visits to the doctor, they cover only 80 percent of these expenses. The rest of the costs are up to you, and there’s no limit on how high they can be.
Medicare also won’t cover prescription drug costs, treatment overseas, dental, vision, hearing and many other types of care. It is possible, however, to fill in the gaps of your Medicare plan. Options like a Medicare Advantage policy or a Medigap policy can provide enhanced coverage and protection.
Evaluate your needs.
Every year the Medicare program has open enrollment. This is a good time to review your health care needs and adjust your coverage, premiums and benefits. It’s also good to keep in mind that Medicare is individual coverage, not family protection. This means you’ll need to consider you and your spouse’s needs separately.
Not sure how to manage your health care costs? Let’s talk about it. Contact us at Baacke Insurance Services to learn more. We welcome the opportunity to help you examine your needs and develop a strategy. Let’s connect soon and start the conversation.
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