Guide to Including Health Care Cost in Retirement Planning 2018

A brand new year is here once again. Most of us are making the traditional New Year’s resolution list, and others are plotting their goals for the year. While we are all looking forward to making improvements to ourselves, a brand new year is also the best time to plan for retirement and of course future health care costs. To jumpstart your planning, this 2018 here’s a quick guide to help you out.

It is best to build health care into your retirement budget. Your future self will thank you for it, that’s for sure!

think healthcare cost

1.     Think about health care expenses this year onwards

If you plan to rely on your savings and Medicare alone, well I think you are like most people – you are underestimating health care expenses.

Know that while Medicare part A is free to those who are qualified to become its beneficiary, most of the other parts of Medicare are not free. You’ll need to pay for premiums for Medicare Part B, and other add-ons like Medicare Supplement plans and Medicare Advantage plans. After all of that, you still have out of pocket costs to deal with. Over time, those premiums, and out-of-pocket costs will go up to the point that it will be hard for you to cope up.

Read: Retirement Expenses That Can Make You Cry

Why you almost forgot to include health care in your retirement planning?
That’s because when you are still in the workforce, your employer often picks up the tab and pay for your healthcare needs. But in retirement, everything will be different. Your health care expenses and the premiums will become your sole responsibilities.

choosing health coverage types

2.     Know the types of health care premiums that you will have

There are four types of health care premiums that you will likely have in retirement. Learn all the benefits of each one of them to be able to get the best coverage for your needs. Aside from having Medicare Part A, you can also have:

a.      Medicare Part B premiums

It covers two types of coverage which are medically necessary services (services or supplies needed to diagnose or treat your medical conditions that meet the standards of medical practice).

Preventive services (care services to prevent or detect illnesses at an early stage). It is often free of charge when you went to a health care provider that accepts assignments.

This premium also depends on your salary. The higher your salary, the higher your Medicare part B premiums will be.

b.      Medicare Supplement plan (also known as Medigap) or Medicare Part C ( also known as Medicare Advantage Plans)

These two are basically the catcher or gap filler of Original Medicare. Since Medicare will only cover about 80% of your total health care bill, you’ll have to pay for the remaining costs by yourself (which can be heavy to your finances) or by using a Medigap plan or Advantage plan.

Read: Just Enrolled in Medicare: Do I Need a Medigap Policy?

You have to be careful in choosing between the two. Take time to analyze and see which of them will best suit your needs. Medigap does not cover dental, vision and eye care; if you are a person that seeks a lot of these services, you will possibly end up with a hefty amount of cost especially for your dental needs. You will also have to choose from ten standardized plans which can be confusing at first. If you are aware of your needs, comparing Medigap plans and choosing what to get will be easier.

Request a Medicare Supplement quote at freemedsuppquotes
On the other hand, having a Medicare Advantage plan may cover your dental, vision and eye care, but may not cover much of your medical or hospitalization needs. This is potentially not good if you are a person with a chronic illness or severe diseases. It also has networks of health care provider which means this plan does not cover your favorite doctors.

c.       Medicare Part D (Drug coverage)

Check which drugs are covered by this plan before enrolling.

d.      Long-term care insurance

Medicare does not cover long-term care insurance. To make sure that you’ll be prepared for long-term care needs, get a long-term care insurance.

calculate health care expenses

3.     Calculate how much health care you might need

Get the picture of how much you will most likely need for health care cost in retirement. The internet offers a variety of online healthcare cost calculator which is useful to help you estimate your future medical expenses. You can try Health Care Costs Calculator of AARP. After getting the estimate, consider the inflation that can cause that value to double, and if you are a married couple, you need to double that amount again.

take actions reduce healthcare cost

4.     Take action on reducing your healthcare costs

Taking actions to reduce your healthcare costs will benefit not only you but also your family, savings and even your assets. To lighten up the weight of rising health care costs, you can try these ways:

a. Be healthy

Remember the saying, “an apple a day keeps the doctor away.” If you keep the doctor away, you also keep the expenses away. On the other hand, you don’t want to spend your retirement bedridden or very sick, right? So, take charge of your health by improving your health literacy and trying your best to be healthy and fit.

b. Manage your tax efficiently

Remember, Medicare Part B and D go higher with your salary. You can work with a good financial planner to help you manage your tax efficiently to help keep your premiums from rising.

c. Be prepared

If possible, make separate saving for healthcare costs. Rising healthcare costs is a reality you should keep in mind all the time. Making a line of defense against it will help you win the battle. If you decided to retire early, make sure you understood the risk of this expense and that you can solely take the responsibility of having to pay your own premiums.


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