Last Modified on August 1, 2019

It is a universally accepted fact that health is wealth. Naturally, health should be of prime importance when planning for retirement too.  As one ages and nears retirement, the body is more prone to medical issues. If you are wondering why it is important to include health insurance in your retirement planning priority list, here is your answer! 

Emergencies don’t come knocking on your door. They just barge in. With the rising cost of healthcare, it is important to include health insurance in your retirement plans. According to Forbes, “The average 65-year-old couple can expect health care costs of more than $275,000 in their retirement years.” When such a cost comes unannounced at a time when you have practically stopped earning, you may find yourself in a rather tough spot. Having insurance can significantly help you in such a situation. 

How to include Health Insurance in Retirement Planning?

1. Pick a health insurance provider
2. Calculate out of pocket premiums
3. Prepare for medical emergencies
4. Sign up for HSAs
5. Make the most of the existing schemes
6. Prepare yourself mentally

1. Pick a Health Insurance provider 

Picking a health insurance provider can be a difficult task if one is not well researched. There are numerous providers in the market offering different benefits at different rates. Calculate how much you need for your retirement and pick the one that compliments your goals and budget. 

Sometimes, the workplace you are working at, might also offer employee health insurance packages. However, as per the Kaiser Family Foundation’s recent research, there has been a decline in the percentage of companies offering health insurance in retirement packages from 40% to 25%. So, it may not be a good idea to rely on your employer on this front.  

2. Calculate out of pocket premiums 

The tricky part about picking any health insurance for retirement is estimating the pros and cons of each. Plan A might be the most suitable for your situation, but it may not suit your budget. This is where early retirement planning plays a key role. 

While creating retirement planning budgets and setting goals, it is important to reserve a major chunk of it for healthcare. This way, you can work backwards while picking your plan and provider. You already know the best price for the ideal health insurance and now the task at hand is to save accordingly.

4 Types of plans for Health Insurance in Retirement

1. Long-term Care Insurance Plans
2. Medicare Part D Coverage 
3. Medicare Part B Coverage 
4. Medicare Advantage Premiums 

The best fit for you out of these four will depend on several things, including potential health issues, current wellbeing status, and the capital at hand. 

3. Prepare for Medical emergencies 

Some of us lead a healthy lifestyle where we don’t have any major health issues. This is why some people often end up picking a basic health insurance plan, banking on their current wellbeing and lifestyle. While this can be financially beneficial at the moment, in the long run, this is a risky move to make.  While picking health insurance for retirement, one has to take into account the unlikely event of an emergency and be prepared for the worst. This may even include adding life insurance to your retirement plan, to be prepared for anything that is to come. 

4. Sign up for HSAs

HSAs or Health Savings Accounts are available in many health insurance plans. One should opt for HSAs for its advantages of tax exemptions. You can pay for health care bills or insurance premiums using the amount in this account and save on tax dues. Investopedia reports that as of 2019 the regular HSA contribution limit is $3,500 for individual coverage and $7,000 for family coverage.

5. Make the most of the existing schemes

In 2014, the Obama government came out with the Affordable Care Act, which allows you to claim coverage for preexisting conditions if you are retiring before the age of 65. The best part of this act is its affordability, so much so that you can get insurance coverage by paying just $1000 a month. 

After the age of 65, you may still claim this coverage, but the more important decision to make at that point would be to decide if you want to stick to your medicare plan or move to a more advanced one. While both have their own pros and cons, you may visit the government website to dig deeper or consult professionals to weigh in their insights. 

6. Prepare yourself mentally 

This links up to the initial discussion on why it is important to have health insurance in retirement, in the first place. A recent study by HSA Bank revealed that people often miscalculate their post-retirement health expenses because of denial or misjudgment. Therefore, it becomes imperative to be mentally prepared and acknowledge that retirement can be a tricky phase. Your health may or may not be the same as today and you may sooner or later require some financial backing.  

To sum it up

The idea of health insurance in retirement is gaining momentum. The health care system has been a point of discussion across different governments and its leaders. They are all trying to come up with a system that places health care ahead of everything else. Bills have been proposed to penalize people without insurance. Although, no such bill has been approved yet, nonetheless, it points out how the future of health care and insurance is shaping up in the U.S.

Financially securing one’s future and wellbeing is best done in the hands of a professional. Wondering how to prepare for retirement? Reach out to financial advisors today!