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The Best Ways to Prepare for Retirement Healthcare Costs

2 Frugal Dudes December 6, 2019 219 2

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    The Best Ways to Prepare for Retirement Healthcare Costs
    2 Frugal Dudes

Episode 136: Learn about the costs of healthcare after retirement, and how to budget for retirement to ensure that you’re covered. We’ll teach you valuable tips and tricks for getting the most out of your retirement healthcare.

Understanding Healthcare Costs in Retirement

There’s a common misconception that Medicare is free. In fact, there are premiums associated with Medicare that often surpass the income provided by social security. Unfortunately, by the time people discover this, they’re already in it.

Healthcare is more expensive as you age, as your needs increase. Medicare, which you can get once you turn 65, will reduce the costs. However, you’re also dealing with a reduced income.

By being proactive in understanding the costs associated with retirement from an early age, people will be better at planning for retirement costs for stress-free healthcare in the golden years.

Medicare and Supplemental Insurance

Many people don’t understand that Medicare doesn’t cover everything. There are four components to Medicare: Part A, Part B, Part C, and Part D.

Traditional Medicare covers Part A and Part B. In other words, your inpatient and outpatient procedures. Part C is a private version of Medicare that covers the initial parts plus extra. Finally, Part D is for prescription drug planning.

You’ll also want to consider the extras and get supplemental insurance for vision, hearing, and other specialist visits.

Benefits of High-Deductible Health Plans

The main benefit of a high-deductible plan is that you will pay lower monthly premiums. Many people choose to do this in their youth, especially if they don’t come close to their deductible anyway. This is also an excellent option for retirees in many situations.

When evaluating the plans, look for something that says HDHP – High-Deductible Health Plan. Most HDHPs are eligible for an HSA account.

Using an HSA Account

Using an HSA account is another effective strategy for saving money on healthcare now and in retirement. When evaluating health insurance plans, look for ones that are eligible for an HSA.

When you use an HSA, that money is yours. It’s tax-deductible, meaning you don’t pay taxes on this money as long as it goes toward medical expenses. You can contribute $3500 as a single individual or $7000 as a married couple. The money grows with interest as you contribute and creates an incredible nest egg for when you reach retirement.

You can also use HSA funds to pay your Medicare premiums. Starting to invest in an HSA now is a great way to set yourself up for the future. HSA money also goes toward specialist services that aren’t included in your basic coverage, such as dental, optometry, assisted living facilities, etc.

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Disclaimer: Kevin and Sean are not professional financial advisors. Do not take any advice they give without first speaking with a professional and performing your own due diligence.

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