How Inflation Can Negatively Impact Your Health in Retirement

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Much has been said recently about inflation and how it has affected many people’s pockets. One aspect of it that people approaching retirement may not have thought about in their retirement planning is how it can affect your medical care once you have retired. Inflation continues to impact the cost of medicines and professional medical care.

Inflation has also impacted the stock and bond markets, which affects the interest rates earned on retirement accounts. Their projected growth depends on higher interest rates than what is occurring now. The Federal Reserve Bank of St. Louis reveals that the bond interest rates are considerably higher than they have been since 2019 but still lower than the decades-long average.

Almost everything costs more now than it did just one year ago. Food prices have been affected considerably and have not returned to the previous rates. Groceries are now 11.9 percent higher, which means your dollar’s buying power is less, and it takes more money just to put food on the table.

As you grow older, you will likely need an increasing amount of medical care and medicines. Inflation continues to drive those prices higher, which is already causing more and more seniors to delay medical treatment and buy needed medications. Fidelity says it will cost the average couple about $315,000 in healthcare costs in retirement, and it does not include the cost of long-term care.

Healthcare Costs Must Be Considered in Your Retirement Planning

Saving money for your future health care must be an essential part of your retirement funds. This year, after the new raise in Social Security came out (3.2 percent), it was also revealed that the cost of Medicare increased by 5.9 percent. Already, it means that inflation has begun to outpace the cost of medical insurance.

According to Kiplinger, about 60 percent of retired seniors have indicated their retirement fund balances have decreased within the past year. Almost as many have said that they know that their spending habits will have to change because of it.

What Some People Are Doing to Lower Their Medical Costs

The most common thing that seniors are doing to reduce their healthcare costs is to avoid doctor visits and treatment. Sometimes, they also have to put off getting needed medications because some of them are very expensive—beyond what they can afford—even with Medicare covering some of the expenses. Doing so could be endangering their health even more.

Reducing Medicare Coverage May Not Be a Good Idea

The government sets Medicare prices each year. Some seniors are switching standard Medicare plans to Medicare Advantage plans to reduce the costs of some types of care that Medicare may not cover. Others are dropping supplemental Medicare parts because they do not need it now—or are unable to keep paying for it—and they want a way to reduce their monthly healthcare insurance premiums.

What is often not realized is that reducing coverage increases their coinsurance, copays, and out-of-pocket costs. It may save money for a little while, but when more serious medical problems come, it would be much more costly.

Inflation Rates Can Fluctuate Widely, but Are Usually More Stable

Historically, average inflation rates have not been as large as they have been since COVID. In more recent years, the highest inflation rate occurred in 1980, when it rose to 14.6 percent. Discover mentions that the average rate between 1986 and 2020 was 2.5 percent. Unfortunately, there is no guarantee that it will return to that rate.

Calculate Your Future Needs With a Retirement Calculator

A retirement calculator that lets you add inflation can help you determine how much you need to save before you retire. Bankrate offers one that enables you to factor in inflation and other information including Social Security. They suggest you prepare for inflation by adding a double-digit inflation rate to your calculations just to be safe.

How to Reduce Inflation’s Impact

Whether you are already retired or still have some time before you walk away from your job, there are some ways you can reduce some of the impact inflation could have in your future. The first thing you might want to do would be to delay your retirement—wait until you are 70 or older.

If you are counting on Social Security to provide a good portion of your retirement income, it increases every year by 8 percent and maxes out at 70. Waiting to take it could give you considerably more income each month. Required minimum distributions (RMDs) on retirement accounts are not mandatory until you turn 73.

Another reason you might want to wait until 70 (or longer) to retire is that many businesses do not want to hire seniors. It means that if you retire, you might be unable to find another job to make up the difference financially. Many seniors are now planning to work much longer as part of their retirement plans.

If you have investments, make sure that they are balanced accordingly. Talk to your financial advisor to get them rebalanced according to your age and risk factors. Also, make sure your investments are diversified to better withstand changing inflation rates and continue to grow.

If you need to change your health insurance plan or parts of it, you must do it during open enrollment, which runs from Oct. 15 to Dec. 7. You can get started with Medicare at Healthcare.gov. During that time, you can change insurance companies, change plans, go from Medicare to Medicare Advantage—or vice versa. Be careful before changing too quickly and learn as much as you can about what is covered and what is not, especially if you have pre-existing conditions.

The Epoch Times copyright © 2023. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.