How To Financially Prepare For Retirement If You Have Health Concerns
Written by
Nicole Spector
Edited by
Jenna Klaverweiden
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Millions of Americans worry that they won’t have enough money saved to comfortably get by in retirement. This is a valid concern given that the cost to retire without financial hardship is steep. Retirees also tend to be hit with “surprise” expenses they didn’t save for. Among the biggest surprise expenses for retirees are those pertaining to healthcare.
Though Medicare covers most medical expenses for those aged 65 and older, it doesn’t cover everything. Everyone needs to build up a nest egg to fund uncovered healthcare-related costs in retirement — but folks who already have medical conditions need to be particularly aggressive with their planning.
How can you financially prepare for retirement if you have health concerns or issues? GOBankingRates spoke with financial experts to find out.
Also see seven unexpected medical expenses that can drain your retirement savings.
Max Out Health Savings Accounts
One of the most powerful weapons for attacking healthcare costs is a health savings account (HSA). This is a type of savings account that allows you to set aside money on a pretax basis to pay for qualified medical expenses. HSAs have no required distributions and never expire, so you can tap them at any time in your life.
“HSAs have three distinct tax benefits: You can make contributions tax-free, grow the account tax-free and withdraw the funds for qualified medical needs,” said Erika Kullberg, a personal finance expert, attorney and founder of Erika.com. “This account can be a lifeline to retire for healthcare expenses.”
Add Healthcare Expenses to Your Retirement Budget
When budgeting for retirement, it’s critical to include health-related expenses — both expected and unexpected.
“Estimate your likely healthcare costs based on your personal health history, factoring in medications, treatments and potential long-term care,” Kullberg said. “Having a clear understanding of your financial needs will allow you to adjust savings or spending plans accordingly. You can also explore estate planning to confirm that your assets are managed properly if your health declines, including creating a power of attorney and living will.”
Explore Disability Benefits
If you have any medical conditions that impact your ability to work before retirement, you may want to look into applying for Social Security Disability Insurance (SSDI).
“SSDI can help provide income while still preserving your retirement savings,” said Tyler Meyer, CFP, founder of Retire to Abundance. “It’s important to understand that SSDI is distinct from regular Social Security, and the application process can be rigorous, so seeking advice from a financial planner or disability expert can be helpful.”
Account For Inflation and Cost-of-Living Adjustments
Prospective retirees with medical issues also need to make room in their retirement budget for inflation and cost-of-living adjustments.
“Healthcare costs often rise faster than inflation, making it important to have a plan for increasing costs over time,” Meyer said. “Investments or other income sources that offer potential growth can help offset these future costs. It’s also crucial to understand whether your pension or other retirement income will adjust with inflation, as many don’t offer this protection.”
Investigate Caregiving Options
When you have medical issues, caregiving becomes a major point of consideration.
“It’s essential to factor in not just the cost of professional care, but also the possibility of needing family members to step in,” Meyer said. “If family caregiving is part of the plan, open discussions about expectations and planning ahead for caregiver burnout or respite care are important.”
Look Into Long-Term Care Insurance
Long-term care is not covered by Medicare, so you should look into long-term care insurance or hybrid policies to help cover that potential expense.
“These types of care are costly, and if not planned for, savings can easily be depleted,” said Steven Kibbel, CFP, ChFC, CLU, senior editor at InternationalMoneyTransfer.com.
Boost Your Retirement Assets
Make moves to maximize your retirement plan investments now while you’re still working.
“You should try to increase your retirement plan investments if you are over 50 and can take advantage of catch-up options for your 401(k) or IRA funds,” Kibbel said. “This ensures that you will need to budget extra for these unexpected medical costs, which will probably exceed the overage estimate.”
Seek Professional Advice Sooner Than Later
It’s best not to do all this alone. Get professionals to help you. Whatever they charge will likely be worth it in the long run.
“Having a team of professionals — financial planners, healthcare experts and estate attorneys — is crucial to ensure all aspects of your retirement plan are aligned with your health needs,” Meyer said. “Working with a fiduciary financial planner can help you navigate these complex decisions, ensuring that your financial plan remains robust despite potential health challenges.”
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