Health care is often one of the largest expenses in many retirees’ budgets. Rising costs coupled with potentially increased medical needs can make health care costs in retirement complex and unpredictable. Fortunately, there are a few ways to manage medical expenses and also save up enough to afford them.
5 Strategies for Keeping Health Care Costs in Retirement under Control
1. Take Preventive Steps
Of course, the best way to control health care costs in retirement is to have relatively few medical expenses in the first place. Taking your health seriously both before and during retirement may help to lower health care expenses.
In addition to keeping costs under control, good health simply makes retirement more enjoyable. You’ll have much more time to spend with family and friends, as well as focus on other activities, such as traveling.
2. Know Your Insurance Policies
Whether you’re on Medicare or a private insurance plan, it’s crucial to understand expenses for premiums, co-pays and more. This will allow you to budget accordingly.
It’s also important to know which doctors and hospitals are included within the network of your insurance plan. Patronizing an out-of-network location can result in a hefty bill.
3. Create Additional Income Streams
In addition to typical retirement plans that you might rely upon, such as a 401(k) or Roth IRA, it might be wise to consider creating additional streams of income as a supplement.
This might include additional investments in stocks or real estate, depending on your financial situation. A Certified Financial Planner™ professional can help you build an effective supplemental income strategy.
4. Consider Using Medigap
Medigap is extra health insurance purchased from a private company to cover costs that Medicare will not pick up. People who have Medicare Part A and Medicare Part B are eligible. It is often highly useful for covering additional health care costs in retirement, especially for retirees who frequently go to the doctor.
5. Contribute to an HSA during Working Years
During your working years, you might consider making significant contributions to a health savings account (HSA).
HSAs are like personal savings accounts that can be used for qualified health care expenses. They have significant tax advantages, because neither contributions nor withdrawals for qualified medical expenses are taxed.
Much like a 401(k), the account balance of an HSA grows tax-free. An HSA that has amassed a significant sum of money can be an extremely valuable asset during retirement.
As you plan for retirement, consider how high health care costs might factor in and adjust your goals accordingly.