Tips for Managing Healthcare in Retirement

Whether you like it or not, there’s a good chance that your healthcare costs will increase when you’re retired. That’s the reality of aging. Unfortunately, if your current healthcare plan is tied to your job and you’re retiring early, you may not have health coverage through Medicare for a while. 

Individuals aren’t eligible for Medicare coverage until they turn 65. If you retire before then, you’ll need to have a plan to cover your healthcare costs. Managing healthcare in retirement is possible without Medicare, you’ll just need to understand your options and make sure you have a plan. 

Extended Workplace Benefits

If you received benefits while you were working, know that some employers offer extended benefits to people who leave the workforce. Sometimes these are only available for a short period, but they may be extended long enough to cover you until you’re eligible for Medicare. 

Ask your employers for this information and use it to help you decide what to do with your retirement planning. If your employer has over 20 employees, you may be able to keep your employer-sponsored plan for up to 18 months through COBRA (Consolidated Omnibus Budget Reconciliation Act). Know that you may end up paying higher premiums than you did while you were working. 

Spousal Coverage

If your spouse is continuing to work, you may be eligible to join their work health plan. This can be a cost-effective option, but your spouse will need to have their own insurance, which isn’t the case for everyone.

Insurance Through the ACA Marketplace

Under the affordable care act, you may be able to purchase insurance from a state or federal insurance plan outside of the regular enrollment period if you are losing employer-provided healthcare. These plans can be helpful as you can no longer be denied coverage, even if you have a pre-existing condition. However, costs vary and the continued existence of ACA subsides is uncertain. 

Other Private Insurance

There are many other private health insurance plans out there. If you only need insurance for a brief period before you are eligible for Medicare, you may be able to purchase short-term insurance for a few months to bridge the gap.

Otherwise, you can purchase health insurance either through a broker or by contacting the company directly. Before you buy, look at the different options available to you, what coverage they provide, and their premiums. You’ll want to make sure that you find a plan that meets your medical and health needs in addition to your budget. 

A Health Savings Account-Eligible Plan

A Health Savings Account (HSA) is a specific account designed to help you pay for healthcare costs. You can contribute money to this account and then use it to both pay for medical costs and lower your taxable income.

However, only certain healthcare plans are eligible to be used with an HSA. These plans have a higher deductible than many plans. However, they’ll also have a lower monthly premium. Essentially, you’ll be able to pay less in monthly costs while using the pre-tax money you’ve put into your HSA to pay for medical costs, including your plan’s deductible.

This sort of flexibility can be helpful, especially if you are using the plan only until you are eligible for Medicare. Once you enroll in Medicare, you can no longer contribute to an HSA, but you can still use the funds in the account to pay for medical expenses as well as Medicare premiums. 

Saving for Healthcare in Retirement

Know that, as you age, your healthcare costs will likely increase. 

If you are not eligible for Medicare, you’ll need to save money to pay healthcare costs or pay for insurance. In fact, even if you are covered by Medicare, it’s important to know that not all medical expenses are covered by this plan. In general, Medicare covers between 50-75% of a person’s total health-related expenses, depending on your situation and your Medicare plan. 

Long-term care not covered by Medicare and these costs can quickly become considerable. Therefore, it makes sense to purchase additional insurance to cover these costs. 

It can be difficult to estimate a person’s healthcare costs, as everyone ages differently and your health situation is unique to you. However, managing healthcare retirement costs is possible through smart saving and planning. 

Think about your expected costs for premiums, deductibles, and out-of-pocket medical expenses. There are estimated costs out there that you can use to determine what you may have to pay. By properly saving for healthcare costs, you can handle your medical expenses in retirement, both before and after you ae eligible for Medicare.