When budgeting for retirement, always make sure to consider health care expenses.
You may be thinking that it’s an obvious factor to have in plans. But for us, we’d like to think that having a proactive approach to these expenses is akin to redefining retirement.
It may even be a given point, perhaps, for some to include health care costs in their plans, but did you know that most boomers tend to forget these essentials?
As revealed in a study conducted by the Insured Retirement Institute last year, only 39% of the boomer respondents revealed they have attempted to figure out how much needs to be set aside for retirement –a third did not consider health care costs in their plans!
As such, we’d like to mention some much-needed pointers to help remind you and other readers about the importance of health care in retirement plans. We hope that through these tips, you would be able to save enough funds for your future.
While having a separate retirement savings account to manage expected health care costs is a sound decision, identifying other possible medical expenses (even if you aren’t expecting for these to happen) offers a safety net that you can fall into in case you do need to pay.
And one particular case to consider is longevity. More often than not, a longer life isn’t considered as a factor to include during plans.
But more years mean more expenses to be paid. Especially for women, who outlive men, having to pay for additional years may be a hurdle too high to leap over.
Why is this so? With gender pay gaps and the possible lack of other sources of income, females definitely have the shorter end of the stick when budgeting for retirement.
Another hidden – and expensive – retirement charge to consider is out-of-pocket health care fees. From prescription drugs to different doctor fees, these bills may quickly pile up and overwhelm even those who have set aside a nest egg.
Case in point, a Commonwealth Fund report showed how these costs could even affect Medicare beneficiaries. Just last year, 15 million Medicare beneficiaries spent 20% of their household income on insurance premiums and out-of-pocket health care costs.
And with an average of $3,024 per year on the out-of-pocket costs, this definitely is a heavy burden to consider, especially for individuals with chronic health conditions or those suffering from low income.
Lastly, underestimating long term care expenses will put a dent in any retirement plan. With costs that may reach to unreasonable amounts (annually, a private room in a nursing home may cost $92,375), skipping this essential and expected retirement care might prove to be a challenge once custodial services are needed.
A Long Term Care Insurance (LTCI) plan may be the perfect policy to address the expensive costs of custodial care during the retirement years. To avoid high insurance premium rates, consider purchasing a plan as early as possible,
For Medicare beneficiaries, a Medicare Supplemental Insurance Plan (Medigap) will cover the out-of-pocket financial gaps.
The great thing about a Medigap policy is that it comes in ten standardized plans. Applicants, therefore, have the advantage to select a plan that will best address their unique needs and preferences.
Also, since private insurance companies sell Medigap policies, an individual may also compare Medicare Supplemental Insurance Quotes among different agents. The option and power to choose offers back the control that boomers need during the twilight years.
Understanding the importance – and urgency – of saving and interpreting health information is needed to protect one’s assets for the future.
And the information posted above may just be the perfect gateway for one to get into the right mindset in budgeting for retirement.
Do you have other suggestions to prepare for the future? Please let us know below!