How to Reduce Medical Costs in Retirement

One of the most significant expenses you’ll face in retirement is healthcare. Fidelity estimates that the average 65-year-old couple retiring in 2022 will require about $300,000 to cover all of their medical expenses, not including dental or long-term care. Although there is no way to avoid retirement healthcare costs altogether, you can lower them by using the advice in this article.

Remain healthy. Though it is clear advice, it is important to reiterate it. You’ll probably spend less on healthcare if you make an effort to eat healthfully and keep active than if you don’t do either and engage in other harmful behaviors like smoking.
Healthy living is a fantastic idea for cutting healthcare costs at any age, and if you implement it now, you’ll develop wholesome routines that will serve you well in retirement. If you’re unsure how to begin bettering your health, consider consulting your doctor about the most effective initial measures.

Understand the costs and benefits of Medicare. Most seniors rely on Medicare to pay for their medical expenses in retirement. But it’s not free, and it’s not comprehensive. Part A and Part B are both parts of the original Medicare. Most patients do not pay monthly premiums for Part A, which covers hospital stays. However, there is a $1,484 deductible, and if you stay in the hospital for more than 60 days, you’ll have to pay copays.

Doctor appointments are included in Part B, and a deductible, copays, and monthly premiums are associated with this. You might be shocked to learn that it also has some coverage gaps. For instance, original Medicare doesn’t pay for hearing aids nor prescription medications, dental, or vision care. If you don’t start planning for these expenses now, they can surprise you in retirement.

Think about enrolling in a Medicare Advantage or supplemental plan. To compensate for some of the holes in original Medicare coverage, you can acquire Medicare supplement plans, which are additional insurance plans. Private insurers provide these plans; thus, there are numerous possibilities, each with a unique set of benefits and costs.

All of the benefits of original Medicare and some of the exclusions are covered by Medicare Advantage plans, generally known as Medicare Part C. Plans differ in what is covered. Still, the majority include prescription drugs (Medicare Part D). If you choose one of these, your costs for regular Medicare and a Medicare supplement plan will be combined into a single premium, deductible, and copay. You must pick one over the other as you can’t typically have both Medicare Advantage and a Medicare supplement plan.

In retirement, you are not required to get any additional health insurance, although doing so will result in a dependable monthly payment. Compared to paying for your medical bills out of pocket, that is simpler to plan for.

As long as you have an insurance plan that qualifies, health savings accounts (HSAs) let you save money for medical costs at any age. When you contribute to an HSA, your taxable income is reduced, and if you use the money for medical expenditures, you won’t pay any taxes. You can also use your HSA for non-medical expenses, but you’ll have to pay taxes on any withdrawals and, if you’re under 65, a 20% early withdrawal penalty.

Only those with high-deductible health insurance plans can make contributions to HSAs. That policy has a deductible of at least $1,400 for a person or $2,800 for a family. If you’re eligible, you can contribute up to $7,300 for a family or $3,650 for an individual in 2022.

Even if you don’t anticipate spending the entire amount on healthcare, your HSA is a beautiful place to stow excess retirement money because some HSA providers allow you to invest your assets. You can leave your money in the HSA to continue growing until you need them because, unlike other retirement plans, the government does not require you to withdraw money from it once you age 72.