Retirement healthcare is an expensive item. According to Fidelity, experts say that a retired couple, average 65 years old in 2021, will need about $ 300,000 in post-tax savings allocated to medical expenses in their post-work life, even when using Medicare. I estimate that it will be.
Totals can be daunting, but with the right planning, the right insurance choices, and a sound understanding of your condition and coverage, you can take steps to keep costs as low as possible. increase. Try these strategies (currently and at retirement) to help you manage your health care costs.
With a medical savings account, you can clear up pre-tax money as medical expenses. You can invest funds, and if you use them for eligible medical expenses now or in the future, both your principal and income are tax exempt. This creates a powerful saving tool.
High deduction health insurance is required to use HSA. If such a plan makes sense to you, experts recommend saving money on your HSA and leaving it as untouched as possible. In 2021, you can save up to $ 3,600 before tax as a single person and up to $ 7,200 if you cover your family.
“These accounts are the most tax-effective plans available,” said Sallie Mullins Thompson, New York City Certified Accountant and Certified Financial Planner. “The main thing you have to do is to contribute as religiously as possible.”
Make a long-term care plan
According to the Department of Health and Human Services, people who are 65 years old today are about 70% likely to need long-term care at some point. One of the best ways to tackle this problem is to plan it.
How long are you going to stay at home? Where would you go if you couldn’t live there anymore? Who can help with financial and health care decisions?
Carolyn McClanahan, who turned from a doctor in Jacksonville, Florida to CFP, said: However, planning can help you prepare for changing circumstances.
This could mean buying traditional long-term care insurance, which, according to the American Long-term Care Insurance Association, can cost thousands of dollars a year.
Alternatively, you can consider a hybrid insurance product that combines whole life insurance and long-term care insurance. (You can use this benefit to give money to your heirs, or, if necessary, as a long-term care expense.)
You can also take out self-insurance by saving money every year for long-term care. It’s important to consider options while you’re in your 50s or early 60s, before the product is too expensive.
Get the right Medicare plan
Choosing the best Medicare policy at the age of 65 means finding one that contains the desired doctor and regular medicines, helping to avoid off-network and out-of-pocket costs. ..
Also, like the original Medicare plan, do you want access to all doctors who accept Medicare, or do you need a plan with a more limited provider network, such as the Medicare Advantage plan, with additional benefits? You need to consider whether.
One way to approach Medicare is to find an agent who can help you compare your options. Matt Chancey, CFP in Tampa, Florida, find someone who is certified to sell as many carriers as possible. In short, they will be able to offer different options in your area.
Actively participate in healthcare, regardless of life stage. If a healthcare provider orders a test, it can push up medical costs. Understand why the test is taking place.
“Tell them,’What do you want to learn from now on, and does this change the cure?'” McClanahan says. “Often doctors order things roughly. So it’s important to do that. It’s part of their protocol and they don’t stop and think, “Is it really necessary in this case?”
The same applies to prescriptions. Ask your doctor if there is something cheaper you can take, or if there are changes you can help with it. “Many doctors don’t spend time talking about lifestyle changes, so they throw pills at people,” says McClanahan. “You can avoid a lot of medicine just by doing the right thing.”
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