Growing older in retirement often means there will be some health problems along the way. These tend to worsen as you age, leading to more doctor visits. While the tendency is to plan for fun and travel during your retirement years, likely, you may not have calculated how much your health care costs could be.
The above figure is not all-inclusive of costs. It does not add the cost of dental care, over-the-counter medications and supplements, or long-term care.
Most of that money will go toward the co-payments, co-insurance, and deductibles needed for hospital and doctor visits. Another large portion of it pays for Medicare health insurance and supplemental Parts—or Medicare Advantage plans, and then the balance is for medications.
High-Income Earners Pay More for Medicare Health Insurance
If you are an individual who earns more than $103,000 or more than $206,000 and file a joint tax return, you will pay much more than those who make less money for your Medicare plan. People who earn up to these amounts will pay $174.70 in 2024.Calculating Social Security Into Your Retirement Plan
Many people not yet retired are counting on their Social Security benefits to cover their medical costs during their retirement years. It may sound good, but it probably is not enough. Social Security does pay an additional cost-of-living amount each year, but sudden cost increases such as rent and housing costs are probably not part of the equation.Put More Into Savings
Preparing for those days when you either can no longer work or choose to stop working requires having a good amount in some form of savings. If you put your money into tax-free retirement accounts such as an IRA or 401(k), remember that it will reduce the size of your retirement funds because of taxes later on.Roll Money Into Roth Accounts
You can get bigger checks each month in retirement by contributing to a Roth IRA or a Roth 401(k). Contributions are pre-tax, which means the money grows, and all withdrawals are tax-free. Another benefit is that Roth accounts do not have required minimum distributions, which lets them continue to grow until the money is needed.Get a Health Savings Account
A health savings account (HSA) can be an excellent way to help cover future medical costs. You will need a high-deductible health insurance policy to start one.You make pretax contributions to it like some other retirement plans—which are tax-deductible—and you make tax-free withdrawals when used for medical care. An HSA is an additional place to put retirement funds if you have maxed out an IRA and a 401(k).
Buy Long-Term Care Coverage
Long-term health insurance is not always needed, but if it is, it will be worth having. Genworth reports that the annual cost for a private room in a nursing home is $108,405, and an assisted living situation costs an average of $54,000 annually. They also say that seven out of ten people can expect to require this kind of care.Medicare does not provide coverage for long-term care. If needed, you are on your own unless you have long-term care insurance.
Start Saving Now for Retirement Years
No matter how young you are, even if you are in your 20s or 30s, you need to save money for retirement and medical care now. RegisteredNursing says that the rate of seniors declaring bankruptcy because of medical costs has more than doubled since 1999. The average American at 65 is currently paying $11,300 yearly, and inflation is raising the costs more than 3 percent annually.Seniors need to look at the numbers in this article carefully and then see how their retirement plan will prepare them for it. Talk to a financial counselor or estate planner to learn how to be better prepared for retirement and future health care costs.