Retirement is an exciting stage in life, but it can also come with financial anxiety.
Planning for healthcare as we age can be especially worrisome: It’s impossible to be certain how much and what kind of expenses will be incurred, and healthcare costs continue to rise.
Fortunately, with the right planning strategies, you can head into your golden years feeling financially secure and prepared for whatever lies ahead. Below, six members of Forbes Finance Council offer simple ways to avoid falling into a hole of debt from health-expenses before and during retirement.
1. Contribute to a Health Savings Account
A recent study showed that the average healthy 65-year old couple will require $280,000 in savings to cover healthcare costs in retirement. That’s an intimidating number, but there is a crucial step one can take to avoid falling into debt: Take full advantage of an HSA. HSAs are triple tax-advantaged: Contributions are tax-deductible, often grow tax-free and don’t incur tax on qualified withdrawals. – Ismael Wrixen, FE International
2. Have a Process for Cash Flow Planning
Undergoing the financial planning process can prepare a pre-retiree to avoid falling into a future hole of healthcare-related debt. The financial planning process focuses on understanding future cash flows and whether your income and savings will be sufficient to cover all your expenses in retirement. Understanding if you will have a gap in advance can help you take action today to avoid that gap. – Amir Eyal, Mylestone Plans LLC
3. Seek Advice From a Medicare Expert
Pre-retirees should partner with a pro who understands how to avoid permanent penalties for Medicare late enrollment and assess Medicare Advantage versus Medigap policies. Participants should assess costs for Part D coverage and Medicare Advantage during annual open enrollment from October 15 to December 7. Don’t place these benefits on autopilot—compare providers every year to seek lower costs. – Richard Rosso, Clarity Financial LLC
4. Estimate Your Future Healthcare Spending Now
We encourage younger Baby Boomers to put together estimates as if they were entering Medicare today. What would they spend on premiums for Medicare itself, for supplemental coverage and for drug coverage? Work with a financial planner to adjust that expense for inflation and life expectancy and then set this as your savings target for healthcare. Putting it on paper makes all the difference. – Danielle Kunkle Roberts, Boomer Benefits
5. Diversify To Prepare For Stock Market Drops
One issue for people going into retirement who are invested in the market is a large market crash or correction such as we’ve seen. Most people never account for a 30% to 40% drop in their retirement value. My advice would be to reallocate investments into safer vehicles and lock down the hard-earned dollars you saved. If you have a healthy retirement account, you’ll have money for healthcare. – Shane Hurley, RedFynn Technologies
6. Look for Low-Stress Retirement Income Streams
Technology has graced us with so much opportunity. Beyond pension and 401(k) plans are many ways to continue working at your own pace, generating income without having to physically break your back. With simple learning tools, pre-retirees can build their own website and generate a continuous revenue stream. Opportunity is at our fingertips, and it’s never too late to start. – Andy Khawaja, Allied Wallet
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