How will rising healtcare costs impact my retirement planning?

Your retirement planning is comprised of many factors that make up the amount of money you need to save for retirement and the income streams that can help you pursue that figure. As you’re building or reviewing your financial targets, you need to consider how individual expenses will contribute to the whole.

For many retirees, one of these big numbers is the amount that they need to set aside for healthcare expenses. Let’s face it: healthcare is expensive and costs are only on the rise.

You need to be proactive in meeting the challenge of rising healthcare costs in order to avoid costly mistakes in your retirement planning. Easier said than done? Maybe not.

Today we’re going to look at the question: How will rising healthcare costs impact my retirement planning? If you’re ready to learn more about this essential component of your retirement planning, grab a cup of coffee and let’s dive in!

Assess Your Needs

As with all aspects of financial planning, you can’t adequately plan for what you need until you know what it is that you need. To plan for healthcare costs in retirement, you will work around a few factors. These include:

  • You and your spouse’s continuing health coverage,
  • Your intended length of retirement,
  • Your health (and your spouse’s health)
  • Family medical history

Obviously these factors vary from investor to investor. Your financial advisor can provide some guidance in parsing out your healthcare situation and help you to get a better idea of what your savings should look like.

Look at Your Health Coverage Options

While you should expect your healthcare costs to rise during retirement, thanks to a combination of increasing healthcare expenses and your own aging, you will not need to shoulder the entire burden of your retirement healthcare expenses.

In the United States, retirees have the option of receiving Medicare as part of their Social Security benefit. This federal health insurance is designed to help retirees offset some of their healthcare expenses, but still leaves premiums, deductibles, and out-of-pocket expenses to your budget.

In addition to applying for Medicare, you’ll want to carefully consider which Plan fits your needs the best — and you’ll want to review this information during each open enrollment period. You may also want to consider supplemental insurance options, like MediGap or private insurance, to keep your healthcare budget on track.

Understand the Balance

Your healthcare costs in retirement will probably not be evenly spaced each month, from the moment that you retire onward. Instead, you will probably experience what most retirees do: an increase in healthcare expenses the older that you get.

This makes it a little tricky to plan for retirement healthcare costs, since you won’t be feeling the pain of increased medical bills until later on. When planning your monthly income, you’ll want to find a strategy that allows you to set funds aside for a healthcare rainy day fund. Sure, you may not need it until you’re a decade or more into your retirement, but when the rainy day comes, you’ll be thanking yourself for setting the funds aside.

While the retirement healthcare question is multifaceted and there are certain unknowns that can’t be entirely accounted for, you can create a game plan that allows you to save to the best of your ability and that provides a cushion for those unseen needs that may arise. Your financial advisor can provide a wealth of knowledge and advice to help you establish a financial strategy for meeting you healthcare needs in retirement.

Want to learn more about retirement planning and the financial advising process? Check out our Ask an Advisor section to hear our CFPs answer questions from readers like you — or submit a question of your own for us to cover in a later segment!