Joseph Sachetta
Healthcare planning can be an uncertain part of your financial planning in retirement. You can make informed estimates regarding future living expenses, but what about healthcare costs? Even if you’re in good health now, you never know what the future holds. Plus, couples have two sets of future healthcare costs to consider. Financial planning around healthcare in retirement is about ensuring that you can afford whatever care you need in the future—while maintaining quality of life in retirement.
MINIMIZING RETIREMENT COSTS: KEY ELEMENTS OF RETIREMENT HEALTHCARE PLANNING
Your advisors can help you navigate any financial planning decisions around retirement, including healthcare planning.
Everyone needs an individualized plan designed for their specific retirement plans and financial picture. These are some of the tools and strategies that might be part of the healthcare planning conversation.
- Medicare and insurance planning.
Medicare planning can be pretty straightforward for many people, but it can get complicated if you plan to work past 65 or are covered by other insurance when you turn 65. In any case, the main objective is to ensure that you make a plan with your advisors for Medicare enrollment before you turn 65. This way, you will be enrolled in the appropriate Medicare parts at the right times. Timing enrollment correctly prevents you from potentially overpaying premiums, paying penalties for late enrollment, or experiencing gaps in coverage.
If you’re not yet nearing retirement age, there are some other ways you might use insurance to prepare for future healthcare costs. Disability insurance, for example, could provide income replacement so you don’t have to dip into your savings if an injury ever limits you from working. Buying long-term care insurance is another option to consider. Consult with your advisors when it comes to insurance, as neither disability insurance nor long-term care insurance are recommended for everyone.
- Financial planning to maximize healthcare savings.
As your healthcare costs rise, your out-of-pocket costs will also rise. Paying for premiums, co-pays, and services not covered by insurance could become a financial stressor for individuals living on a fixed income in retirement. Maximizing your healthcare savings is critically important. That includes saving and spending strategically. If you’re not yet ready to enroll in Medicare, ensure you’re taking full advantage of your HSA as a savings tool for retirement. Consult your advisors about the most tax-efficient ways to pay your healthcare expenses in retirement.
- Preparing for long-term care expenses.
The most recent estimates from the Department of Health and Human Services say that 70 percent of people turning 65 now will need some form of long-term care. An estimated 20 percent of current 65-year-olds will need long-term care for at least five years. These services can range from occasional visits by home health aides to full-time care in a nursing home or assisted living facility.
Even if you’re healthy now, planning for potential long-term care costs is essential. Medicare and private health insurance may cover some services, but not all. If you or your spouse eventually need assisted living or nursing home care, those expenses could be significant. That’s why it’s important to work with your advisors to explore your options.
Your long-term care plan should focus on ensuring you and your spouse can afford the care you need without unnecessary financial strain. That might involve using tax-advantaged savings, long-term care insurance, the timing of when to start taking your Social Security payments, or other financial strategies to balance future care costs with your overall retirement goals. Consulting with your advisors can help you determine the best approach based on your specific financial situation.
HEALTHCARE PLANNING NOW CAN MINIMIZE FUTURE RETIREMENT COSTS
Sachetta’s financial planning advisors are here to help you navigate all the thorniest parts of wealth management for retirement, including the financial parts of healthcare planning. Let’s talk about strategies to help you minimize retirement costs without sacrificing the quality of care for you or your spouse. Contact us today.
Joseph Sachetta, CFP®, CPA/PFS, MBA, MST, For over 40 years, Joe has worked in finance and accounting. He is a Certified Financial Planner, and a Certified Public Accountant. Joe’s passion lies with helping his clients strike a balance between living for today and saving for tomorrow.