We often think of retirement planning in the sense of setting a savings goal, deciding upon a target date for retirement, and then steadily working toward the finish line. But once you've reached your goal, retirement planning doesn't stop there. You must also analyze your future expenses, establish a budget, and find ways to manage or reduce the significant costs you will face in retirement.
Healthcare is perhaps the largest expense faced by retirees, with prices rising every year. Take these four steps now, and as you enter retirement, to help keep your expenses under control.
Protect your health. One way to prevent large health care bills is to keep yourself healthy! Eat a balanced diet, exercise regularly, quit smoking, and cut back on any other unhealthy habits like alcoholic beverages. A healthy lifestyle can prevent many common (and expensive) health problems.
Estimate your expenses. When you reach Medicare eligibility at age 65, you will begin to pay Medicare premiums. In the year or two leading up to retirement, research current premium amounts, keeping in mind that this expense can and probably will rise over time. While you're doing your research, estimate co-pays and deductibles. Do you need any equipment or medication to manage a health condition? Make sure you understand your coverage limits, and how much you will have to pay out of pocket.
Set a budget. Now, using that information, set a budget for your healthcare expenses. The average couple retiring today can expect to spend about $226,000 on healthcare over the rest of their lives. Keep in mind this is just an average, and that your own healthcare expenses will be influenced by the state of your health, your location, and sometimes luck. Remember to research the cost of long term nursing care in your area, keeping in mind that many retirees need these services at some point. Medicare won't pay for most long-term care costs.
Investigate solutions. Does your healthcare budget seem workable? If you're worried, there are options available to help you manage your expenses. Long term care insurance will kick in to cover nursing care if you ever need it, and Medicare supplemental insurance can help with the cost of prescriptions, equipment, and more. If you are eligible to open a health savings account now, you can take reap helpful tax advantages while stashing more money to help cover this retirement expense. Keep in mind that the cost of healthcare is rapidly rising, but you can take control of your future budget by investigating all of your options now.
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