In the past several months, Americans have been concerned that inflation has increased steadily. A Gallup poll conducted in March found that 17 percent of Americans think that the cost of living is too high and rising inflation is a serious problem, compared to 8 percent in January. If you are close to retiring, there are things to consider since prices continue to increase and the most significant, considering the high cost for retirees, is health care.
Although inflation could cause higher prescription and medical supplies prices in the short run, healthcare costs generally outstrip inflation over the long haul regardless of the market conditions. So, those soon to retire need to consider the future and include health-related costs within their financial plans.
Estimate costs
According to a study by Vanguard that has developed in conjunction together with Mercer Health, even with Medicare, the average health care costs can be as high as $5,000 annually. When I work on behalf of clients, I usually concentrate on planning health insurance for couples or individuals who is 5 to 10 years away from retirement. This type of planning will allow people to devise a strategic strategy for planning for -and ultimately, paying for– future health-related costs.
Just a few years before retirement, you should begin to think about the retirement timeline details. For instance, when a person intends to retire at age 62 but will not be qualified to receive Medicare until age 65 and they’ll have to figure out what they’ll pay for health care for the next three years. Some may take a look at joining their spouse’s medical insurance (if the other partner isn’t retiring simultaneously) or opting for COBRA, or looking for an insurance plan with a short-term term to make up the shortfall. In other cases, it could involve tapping into the liquid asset pool or using an HSA to cover healthcare expenses before Medicare coverage starts.
The next step is to map out your future expenses and create a savings plan that will meet your goals for the future. Medicare.gov offers valuable information about how to qualify and the estimated cost of premiums. For instance, Vanguard also offers Personal Advisor Services to clients and a health care cost Estimator that estimates health treatment and long-term health care costs.
Examine the family’s genealogy
As important as timing is, the health aspect like the medical history of your family and longevity expectations and the state of your health can impact your Medicare coverage choices. The notion of planning for a future health situation can indeed be a bit emotional. But, taking a more forward-looking method, and one that an expert financial advisor aids could reduce the need to make difficult and abrupt decisions during an illness.
A further expense not included in Medicare is the need for long-term health care. The top conditions that typically require long-term health care include Alzheimer’s and Parkinson’s disease, stroke, and osteoarthritis. Check your family history before retirement to determine if they need long-term care could be something that should be accounted for.
The need for long-term health care could be an economic “wild card” because some patients may not require it during their entire lives. I assist clients in considering hypothetical scenarios so that it helps determine appropriate goals for health care that are tied to an investment plan.
“Are you planning to move to a new location in retirement?” Some locations (such as the West Coast and Northeast) are likely to have higher health costs.
“Will someone be there to care for you in your later years?” If the answer is yes, it can offset the cost. If you don’t have the assistance of a spouse or a child, it could result in the need for external resources that can be expensive.
“Where can I be most at ease as I get older?” That could be the difference between home-based nursing and shared space at an assisted living facility or private services at a larger facility.
Remember financial ‘trade-offs.’
Along with analyzing your family’s history and estimating future health costs, It is essential to comprehend the financial implications in play across different years. For instance, those who retire in their 60s will see most of their retirement income going to trips or new hobbies. As people age, and the decline, there is a natural exchange in costs as the money once paid for a hobby like a golf could be used to pay for expenses for prescriptions. This money exchange is crucial to remember since retirement income is likely to fluctuate throughout the various seasons of life.
Health insurance is only one aspect that makes up the whole retirement plan puzzle. With prices continuing to increase in this field, it is crucial to create plans for retirement years in advance to ensure financial security for the long term.
