How to Budget for Healthcare after Retirement
January 2, 2020
Many people underestimate how much healthcare will cost them after retirement. We know how frustrating it is to try and guess the amount you’ll need!
Managing your money well during retirement is so important for helping you make the most of your golden years. Here are some ways to help you estimate healthcare costs so that they don’t surprise you and stress out your wallet.
Keep in Mind that Medicare Is Not Completely Free
While Medicare Part A is provided at no cost for most people, Part B requires that you pay a premium. If you are a high earning person, the premium increases based on your income. While these plans are comprehensive major medical programs, they don't cover every possible medical or hospital service. Also, Medicare typically doesn't offer or guarantee that a covered service will be paid at 100%. Many people find it cost effective to add a prescription plan and/or supplemental insurance. For planning purposes, it's helpful to know what Parts A and B don't include:
- Routine dental exams, cleanings, x-rays, root canals, dentures, and extractions
- Eye examinations related to prescribing glasses (Medicare does provide coverage for diagnosis and treatment for diseases and conditions of the eye.)
- Cosmetic surgery
- Acupuncture
- Hearing aids and exams for fitting them
- Long-term care (Medicare does have limited coverage for skilled nursing care coverage, but this is not long-term care.)
Consider How Much of Your Household Spending Will Go to Healthcare
Plan on budgeting between nine and fourteen percent of your household spending for healthcare. This percentage can change depending on where you live and how healthy you are, so make sure to research healthcare costs in your area. You can take an active role in reducing healthcare costs over the long-term by doing everything you can to keep your body as healthy as possible, including preventative care. Regular checkups with your doctor, and your dentist, will keep your body—and your wallet—in better shape.
Work with a Tax Planner to Manage Your Distributions Efficiently
If you are a high-income taxpayer, the more you make, the higher your Medicare Part B and D premiums will be. Work with a tax accountant or retirement planner to help keep your Medicare premiums from rising.
A Few Other Factors to Consider
Here are some other factors to consider as you work on your healthcare budget:
- Married people live longer and tend to have better health than single people. If you are married, you may want to budget for additional years of healthcare.
- Inflation often causes healthcare costs—and Medicare premiums—to increase.
Want more help navigating Medicare? Classic Insurance & Financial Services is an independent brokerage that specializes in helping clients select the right type of Medicare for their specific needs. To seek out our resources, services, and advice, click here or subscribe now to our quarterly newsletter.
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