How to Plan for Healthcare Costs: 4 Stages to Consider

Oct 24, 2023

As healthcare costs increase, planning is crucial.

How can you prepare for future needs? Here are four stages to consider and what to do in each stage.


1. Pre-Retirement

While working, healthcare costs often blend into general living expenses. We account for income and savings, and the remainder typically goes toward essential expenses, such as taxes, property-related costs, and insurance premiums.

Your current premiums may differ substantially from your premiums in retirement due to factors like coverage for family members or company benefit plans.

If you are concerned about increasing costs, it’s important to talk to your advisor so you can strategize and plan for retirement.


 2. Post-Retirement: Before Age 65 (pre-Medicare eligibility)

If you’re considering early retirement, remember that healthcare expenses can vary based on:

i. Your location

ii. Your taxable income

iii. Your coverage requirements

Particularly, if you seek coverage from the marketplace, your taxable income may affect costs. Be aware of these variations and account for them in your retirement planning.

As advisors, we can make recommendations in light of where you live, what you make, and what you need.


3. Post-Retirement: After Age 65 (Medicare and related expenses)

You might be familiar with Medicare Part B premiums. While these won’t change drastically over your lifetime, it’s essential to understand how your financial decisions (such as a Roth conversion) could impact them.

An advisor can help you navigate the effects of any changes you make in your post-retirement years.

In addition, always keep an eye on known out-of-pocket medical expenses that might arise, incorporating them into your retirement budget.


4. Long-Term Care

These expenses require careful consideration, and Medicare typically does not cover them. Long-term care can be a significant expense, and it’s crucial to have a plan that addresses potential needs.

Advisors are trained to build the right kind of flexible long-term plan for you, so it’s important to ask for help when you need it.


In Summary

Healthcare and insurance costs are part of your cash outflows during retirement. Consider if these costs are consistent year after year, if your taxable income impacts them, and how they affect your taxes.

By understanding and planning for these costs, we aim to make your retirement as comfortable and stress free as possible.


Schedule an appointment with an advisor in your area.