With healthcare costs skyrocketing, you may wonder how to handle the additional strain on your budget. Increasing costs for medical care, prescription drugs, and preventative services may also greatly impact your financial security during your retirement years, particularly since the cost of healthcare can increase as you grow older. Making smart decisions with your retirement planning today is the best strategy to prepare for a future that includes a comfortable retirement.
Healthcare Costs Are Rising
Many employer-sponsored or individually purchased healthcare plans have climbing premiums and higher deductibles and require that you contribute more of your own money towards care through out-of-pocket costs. Without insurance, medical bills can reach devastating amounts. The solution is to build a fund to pay for these expenses. Planning for healthcare costs in retirement doesn’t have to be a mystery. Use an online retirement calculator to estimate what you need and then specify with a healthcare costs calculator to avoid worries of outliving your savings.
Increased Need for Medical Services Can Deplete Your Savings
Whether you experience an unexpected medical-related expense in your later years or simply require more frequent and increased care due to age, there’s a high probability that you’ll spend more on healthcare the older you get. You may even need to dip into your retirement account early to pay for a large medical bill. Ongoing expenses and one-time medical bills can both easily drain your savings and force you to drastically alter your budget or even cut corners on other essentials.
Retirement Planning for Healthcare Expenses

More workers are now delaying retirement to earn more money to help mitigate current or future medical costs, but there’s a better way. Take a close look at your healthcare needs to understand what coverage you anticipate needing in your retirement years. While it’s impossible to predict your future medical needs, taking stock of your medical history, overall health, and making a plan to cover the likely outcomes can put you in a good position to handle anything that comes your way.
Contribute to Your Retirement Account
Putting money away into your retirement account is a great start. However, you must factor in all the expenses your retirement is meant to cover. Depending on your situation and whether or not you have a pension, investments, or other sources of income, you may rely on your retirement to fund your everyday expenses, leaving little available for medical costs unless you adjust your contributions accordingly.
Factor Employer Benefits into Job Decisions
An employer-backed health plan, health savings account, or wellness program can all help you build and maintain good health now to lower your risk of developing certain diseases later in life. You can also check with your employer to discover if they offer any retiree health benefits. Take advantage of cost-saving opportunities now so you can save more for later. Purchasing accident, critical illness, or hospital indemnity insurance can supplement your employer-funded health insurance and bridge the gap of what it may not cover.
Take Steps to Build an Emergency Fund
Whenever possible, consider putting aside any extra money into an emergency fund to help you cover large bills or unexpected costs. Having an extra resource in an easily accessible place, like a bank account, can be helpful if you need fast access to cash.
Know Your Health Coverage Options During Retirement
Most employer-sponsored health insurance plans don’t continue into retirement, so you must know your other options for coverage. Once you reach age 65, you have the option to enroll in Medicare Parts A and B, which covers a range of medical services. Keep in mind that you will still be responsible for premiums, deductibles, and partial payment of most services, while others, like vision and dental, are not covered at all.
You may want to purchase a separate prescription drug plan, called Medicare Part D, or a Medigap plan to help with out-of-pocket costs. Medicare Part C, also called Medicare Advantage, is another optional coverage that provides private insurance for some of the services not covered by Medicare. State-administered Medicaid is an option for those who meet the strict income eligibility requirements.
No part of Medicare covers long-term care, which is expensive and can quickly burn through your resources. Long-term care coverage can help to pay for in-home care or care in a facility. Premiums for these plans increase sharply once you reach your 60s, so you must plan ahead. You could also consider a hybrid option that pairs long-term care benefits with a life insurance policy.
If you retire before you are eligible for Medicare, you can purchase a health insurance plan through a broker or directly from the insurer. Some high-deductible plans also permit you to open a health savings account.
The financial burden of healthcare costs doesn’t have to alter your retirement goals if you remain aware of your potential cost responsibilities and take the time to choose a retirement strategy that addresses your future needs. Act now to begin building your savings and educating yourself on your options. Having a hefty retirement account and a plan to access necessary coverage once you leave your job to enter retirement will give you peace of mind now and in the future.
You might also be interested in: The Impact of Inflation on Retirement Savings and How to Combat It