Sometimes I feel that the more I learn about this phase of life traditionally referred to as “retirement”, the less confidence I have about realizing my hopes and dreams for this next phase of my life. I say that primarily because of this huge looming issue of healthcare – not so much what is known, but what is unknown. How do I plan for something that is so uncertain, and potentially so life changing and resource draining? I honestly struggle with this, as so many of us do.
My father was diagnosed with prostate cancer shortly before his scheduled retirement. As a result, he continued to work for another year while he was treated. He was fortunate to have employer provided healthcare after his retirement, so his medical expenses, which increased over the five years he fought cancer after he retired, did not wreak havoc on my parents’ financial situation.
But many retirees and pre-retirees today do not have access to this type of healthcare coverage, and I know that I will need to plan for these expenses myself. As the cost of healthcare rises, and the whole healthcare insurance industry seems to be in a state of upheaval, it is just scary to think about. A dear friend recently informed her employer of her intent to retire in mid-2015 at the age of 61; then just last month, she learned she has Stage 3 breast cancer and will face treatments for more than a year. She’s fortunate to have good healthcare coverage through her employer, but what if this had happened AFTER her retirement and before her eligibility for Medicare?
Even with Medicare, there are additional premiums and co-payments that can eat into your planned retirement income in the event of a major illness. Just the basic premiums for Part B and D, along with co-payments, can cost a couple $8,000 to $10,000 per year – and that doesn’t include dental, vision and hearing expenses which Medicare does not cover. Over a 25 year retirement, those expenses can add up to more than a quarter of a million dollars – and that’s if you don’t have a serious illness.
So what’s the solution? Well, first of all, take care of your health! I read once that if you were told you would only have one car for your entire lifetime, odds are you would take great care of that car – regular maintenance and tune-ups, oil changes regularly, maintaining the interior and exterior to make sure it would last a long time. The same thing applies to our body and our health, but most of us (me included!) are not so good about eating right, exercising regularly and getting enough sleep. But I am focusing on this as one of the things I can do in the face of the unknowns of my health and healthcare costs.
Secondly, I am contributing pre-tax dollars to a Health Savings Account (HSA) to build up a reserve of money that I can use to cover my health care expenses in retirement. This reserve for potential medical expenses in retirement won’t solve everything, but planning for the unknown is really a big part of saving and investing for your retirement.
Please note: An HSA account may not be suitable for all situations. Please consider the healthcare options available to you.