How to Keep Healthcare Costs Low in Retirement

Even with excellent insurance coverage and ample preventive care, you may face greatly escalating costs well into your retirement. Andy Dean Photography/Shutterstock

One of your biggest categories of expenses in retirement is going to be healthcare. Even with excellent insurance coverage and ample preventive care, you may face greatly escalating costs well into your retirement.

How do you keep these costs low? And how much of an impact will this have on your finances overall?

Plan for the Gaps in Medicare

First, and probably most importantly, you need to prepare for gaps in your Medicare coverage. In retirement, you’ll likely qualify for Medicare, which is going to cover a great deal of your medical expenses, but it’s important to recognize that it’s not going to cover everything.

Even if you qualify for both Medicare and Medicaid (a separate plan for people with low income), there may be gaps in your coverage that you’ll need to account for. On top of that, you’ll still be responsible for paying premiums associated with these forms of coverage.

So how do you plan for the gaps in these programs?

Get to Know the Healthcare You Qualify for

You start by learning as much as you can about Medicare, Medicaid, and any other programs that you qualify for. Learn exactly what your premiums are going to be. Know which expenses you’re going to be responsible for. Learn about what these plans do and do not cover. Your goal is to become an expert in Medicare, so that you can be an expert in planning around it.

Often, it’s a good idea to invest in a supplementary insurance policy designed to close the gaps that Medicare leaves behind. There are many insurance providers that have specialized insurance policies for these purposes, and they’re commonly called “Medigap” policies for obvious reasons. Just make sure you know what you’re buying before you move forward.

Also, understand that Medicare doesn’t have robust options for long-term care. Long-term care can be extremely expensive, and it’s something that many retirees simply aren’t prepared for. If you want coverage for your long-term care, you’re going to need a separate long-term care insurance policy. This usually isn’t very expensive, but it can save you a fortune if you ever find yourself in need of long-term care. This is going to become especially important as you get older.

You may also be able to supplement Medicare by investing in programs and policies on your own, or even doing some of your own shopping. For example, you can shop for glasses online to save money. Even if you have coverage for eye appointments and partial coverage for prescription glasses, there are probably strict upper limits on the payouts. You can typically find prescription glasses much cheaper by shopping around online. You may also want to take advantage of dental discount plans and similar products designed to help you save money on various health-related needs.

Take Advantage of Financial Options Available to You

There may be secondary financial options available to you as well. If you qualify for them, and they seem like a good fit for your retirement and healthcare expense management goals, consider taking advantage of them.

Examples include:

1) Health Savings Accounts

Health savings accounts (HSAs) are specialized savings accounts that allow you to increase your savings and minimize your tax burden. Not everyone qualifies to open an HSA, but if you qualify, this could be a great place to store some of your money for health-related expenses.

2) Health Reimbursement Arrangements (HRA)

You may also qualify for an HRA through your employer. This type of program will reimburse you for certain types of health and medical expenses, including some of your premiums.

Focus on Health and Preventive Care

Some of your best strategies are going to be focused on maintaining your own health and pursuing preventive care. In short, the healthier you are, the less you’ll need to utilize medical services, and the less you’ll eventually pay for those services.

These are some of the most important approaches for you to follow:

1) Attend Preventive Appointments and Checkups

Attend all your preventive appointments, screenings, and checkups. Some of these may seem superfluous, especially if you feel good at the moment. Some of these may seem like unnecessary expenses, especially if you’re required to pay a copay for them. But these are opportunities to catch problems before they become bigger and get the advice you need to live a healthier, less expensive lifestyle. They may be somewhat inconvenient, and they may cost you some money, but you should think of them as investments in your future. If you regularly attend these appointments and follow the advice you get when you attend them, you’ll be in a much better position to outlive your savings and comfortably handle your medical expenses in the future.

2) Listen to (and Follow) Your Doctor’s Advice

Similarly, it’s important to listen to and follow your doctor’s advice, as well as the advice of any other healthcare providers you interact with. These are experts in their respective disciplines, and they have a vested interest in your health and long-term success. If they tell you to abstain from a certain activity, or incorporate something into your daily life, follow through. Too many people end up neglecting this out of apathy, a differing opinion, or mere forgetfulness. Don’t let it happen to you.

3) Cease Unhealthy Habits and Activities

If you haven’t already, now is a great time to honestly evaluate your habits and lifestyle. This is true whether you’re already years deep into your retirement or whether you’re just starting to plan for retirement. It’s never too late to start capitalizing on the benefits of ceasing a bad habit. Smoking tobacco, drinking alcohol excessively, and eating junk foods in large quantities can all negatively impact your health well into the future, so do whatever is necessary to end these habits now.

4) Get to a Healthy Weight

If you’re currently overweight, it’s a good idea to work on getting to a healthier weight. This is a controversial and annoying issue for many, but the empirical evidence suggests that obesity is highly correlated with a wide variety of health complications. It has the potential to make almost every conceivable health complication worse. If you begin aging at a healthier weight, you’ll be far less likely to suffer from a multitude of health ailments, from heart disease to diabetes, and you’ll have an easier time dealing with whatever health complications do arise. Fortunately, getting to a healthy weight isn’t especially complicated, though it can be challenging. You simply have to optimize your nutritional intake and get plenty of physical exercise, both of which are independent strategies for staying healthier and reducing health care expenses in retirement.

5) Improve Your Water and Nutritional Intake

Drink lots of water throughout the day, and avoid sugary soft drinks. Staying hydrated is good for your health in many ways, and it can help regulate your metabolism. It’s also important to take a look at your nutritional intake and optimize it for long-term health. Make sure you’re eating an appropriate amount of calories each day, with appropriate portion sizes for each meal. It’s also important to make sure you’re getting an adequate balance of carbohydrates, proteins, and healthy fats and that you’re getting a sufficient intake of the vitamins and minerals. Eating plenty of fruits and vegetables, along with lean meats, complex carbohydrates, and nuts, can help you achieve this.

6) Get Lots of Physical Exercise

As you get older, you’re going to become less mobile. But you can delay this process by getting as much physical exercise as you can while you can. You don’t have to become a gym rat, but you should get at least some moderate physical activity each day, even if that’s just a brisk walk around the block. Also, try to get a mix of both cardiovascular and resistance exercise in your routine. Cardiovascular exercise is good for your heart, lungs, and circulation, while resistance exercise can help you preserve muscle mass, bone density, and strength.

7) Prioritize Your Sleep

It’s also a good idea to prioritize your sleep. Adults are recommended to get 7 to 9 hours of sleep every night, so if you aren’t currently getting this, take a look at your sleep hygiene and see if you can make any improvements to it. For example, is it reasonable for you to go to bed earlier? Are you able to make changes to your sleeping environment so that it’s more comfortable or more conducive to long-term sleep?

8) Stay Social

Don’t underestimate the impact that socialization can have on your physical health. Older adults with more social connections and more frequent social interactions are less likely to be depressed and less likely to suffer from a wide range of other health complications.

Prepare to Negotiate

You can often negotiate healthcare and medical expenses. If there are certain medical expenses that your insurance policies and discount plans don’t cover, consider reaching out directly to your healthcare or medical provider and negotiating for a discount on the remaining difference. Chances are, they’ll work with you to either decrease what you owe or come up with a payment plan that works for you. This is especially important for any major expenses that you face in retirement.

Build Up Your Savings

Even with all these strategies, some people are going to struggle with healthcare and medical expenses. Your last line of defense is to build up your savings as much as possible, so you have more capital and more dividend and interest earnings that you can spend on medical expenses.

1) Start Earlier

If you aren’t currently retired, start planning for these types of expenses now. The earlier you start planning for medical expenses in retirement and the sooner you start saving, the better prepared you’re going to be.

2) Prioritize Slightly Riskier Assets

If you’re still young, consider prioritizing slightly riskier assets. Though not always the case, it’s often true that riskier assets are associated with bigger potential rewards. If you’re still young, you’ll have higher risk tolerance—and plenty of time to re-optimize your portfolio if you suffer early losses.

3) Delay Your Retirement

If you’re starting to come up on your potential retirement, consider delaying. Each year you wait to retire means you’ll be able to take more money out of Social Security and make more money in your current career. At the latest stages of your career, you should be making good money, so even a few years of delay can make a big impact on how much you have saved for healthcare and medical expenses. This may also allow you to take advantage of an employer-sponsored health plan.

4) Get a Side Gig

If you still anticipate struggling with these types of expenses in your retirement, consider getting a side gig or preparing to get one. There are plenty of side jobs and hobbies conducive to older and retired folks; you just have to find something that’s a good fit for your skills and capabilities.

5) Decrease Your Other Living Expenses

You can get some wiggle room by decreasing your other living expenses as well. For example, you can move to a smaller house in a cheaper part of the city and instantly save hundreds of dollars per month.

6) Live Like You’re Retired (if You’re Not Yet)

Finally, consider living like you’re retired if you’re not currently doing so. As you approach retirement, living more minimally can buy you more time to save more money. And, it can get you acclimated to your new financial environment at the same time.

Conclusion

Healthcare costs are high. They keep climbing higher. And as you get older, your need for medical care and health services is only going to increase. This is a cataclysmic combination for anyone who isn’t adequately prepared for this reality. But if you’re willing to do some proactive work to keep your healthcare costs low in retirement, and you still have plenty of time to grow your nest egg, you should be in a position to make these expenses negligible.

By Deanna Ritchie

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