When individuals retire, they not only leave their jobs, they give up a steady paycheck. For many people, retirement can be a potentially risky financial endeavour. Saving for retirement is a great way to mitigate such risks, but unexpected expenses such as medical bills can quickly derail your retirement plans.
Many people need more medical care as they get older. Fidelity Investments’ health care cost estimates for retirees show that health care could be one of his biggest expenses in retirement. The average 65-year-old couple who retires in her 2021 in the United States is expected to spend her $300,000 on post-retirement health care and medical expenses. According to The Street, other studies have shown that it’s wise for a retiree to plan to spend between $3,000 and $7,700 on her medical bills annually.
Financial advisers warn that relying solely on Medicare to cover medical costs won’t cut it. is not enough. There may be a gap between chronic treatment of a disease and specialized treatment of a specific condition. Long-term care services are also typically excluded. It’s important to note that Medicare covers general doctor visits, but not deductibles or copayments.
Individuals should actively plan for their retirement medical expenses. Health care is the biggest expense for retirees after housing. Medical expense accounts and long-term health insurance are he two options for people looking for ways to cover medical expenses in retirement.
As of 2022, individuals can contribute up to $3,650 and families up to $7,300 annually to the Medical Savings Account. After age 55, an additional $1,000 per year is allowed. HSA money grows tax-free and can be used tax-free on eligible medical expenses. When you join Medicare, you are no longer eligible to contribute to HSA, but you can use the money already in your account to pay for eligible medical expenses not covered by Medicare.
Long-term care insurance is also an option, and many people in their 50s and 60s invest in accounts. The sooner an individual enrolls in the program, the lower the premium. According to Personal Capital, most policies won’t start until the patient needs her help for 90 days and other eligible guidelines are met. Generally speaking, long-term care insurance is also used or lost. If you do not need to use insurance at all, no refund will be given. This is a risk that certain people are willing to take.
In addition to these options, people may consider the Gap Insurance Program. When planning for retirement, it is wise to consult a financial advisor who can customize a product based on your anticipated needs.
