Paying for Health Care in Retirement: The 5 Best Options

Paying for Health Care in Retirement: The 5 Best Options

Your medical costs may rise once you retire and are not covered by an employer-sponsored health plan. Make sure you have the coverage and assets you need to stay healthy.

Like it or not, retirement just isn’t what it used to be. For one thing, health care has gotten more expensive. Not too long ago, it was possible to retire with full medical benefits. But those days are gone for most of us. Now experts say retired couples need more than $200,000 just to pay the doctor bills.

That may be a lot of money, but don’t panic just yet. In the first place, you don’t have to come up with it all at once. Second, there are plenty of ways to cover your expenses. What’s more, you can combine them any way you like. Some of these may not be right for you, but you won’t know until you’ve weighed your options.

1. Health savings account (HSA)

An HSA is one of the best ways to fund your retirement health care costs. If you start early, put away the maximum amount each year and invest it wisely, you could have a golden nest egg by the time you retire. In fact, it’s possible to amass as much as $500,000 over the course of your working life. Even better, your deposits are tax-free. Just remember, you can open an HSA only if you have a high deductible health plan (HDHP). And you need to get started soon, because you can’t make deposits once you turn 65.

2. Medicare Advantage

Medicare alone will cover only about half of your medical bills. Medicare Advantage is supplemental insurance that helps you fill in the coverage gaps. Your premiums and copayments may be higher, depending on the policy you choose. But your overall benefits are much improved. As a result, your overall expenses could go way down.

3. Medicare Part D (prescription) coverage

Prescription meds are one of the reasons health care is so expensive. But with a Medicare Part D plan, you can rein in the size of your pharmacy bill. Premiums run about $35 a month and there are additional copayments as well. Even so, a Part D plan could help you slash your prescription costs by a few thousand dollars each year.

4. Long-term care insurance

With any luck, you’ll never need custodial care. But if you do, a long-term care policy could save the day. Most policies cover a variety of scenarios. These include in-home nursing, assisted living and nursing home facilities. But since only a minority of Americans ever use custodial care, this kind of coverage may not be right for you. You’ll need to seriously weigh your options before you decide.

5. Investments

Regardless of your health and coverage status, you will need some extra funds on hand for health care. After all, who wants to spend their life savings on medical bills? That’s why it’s a good idea to make some extra investments beforehand. Try putting the money some place other than your retirement account. That way you can keep it separate.

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