Insurance · December 16, 2021

Getting Ahead of Long-Term Healthcare Costs

You're working hard to save for retirement, and when those golden years arrive, you want to enjoy them comfortably. That means preparing for anything that can add up quickly and impact your savings in retirement—such as long-term healthcare costs.

While you're planning ahead, now is a great time to start thinking about these costs, particularly those beyond the coverage of your health insurance. Here's how to get started.

The costs of long-term healthcare

Knowing the costs you may face can help you develop a solid retirement savings plan around your future needs. The Employee Benefit Research Institute found that a 65-year-old couple retiring today could need more than $300,000 to cover healthcare costs in retirement.

The first thing to know regarding future healthcare costs is that Medicare won't cover everything. You might have to set aside funds to pay for routine eye exams and dental care, which aren't covered by Medicare. Or you might want to purchase supplemental health insurance to bridge these gaps and factor the costs into your planning.

It's important to realize that even if you're very healthy today, there may come a time when you need at-home professional care or to move into a nursing home. A study from the US Department of Health and Human Services found that 70% of adults over 65 develop a need for long-term care, and 24% receive more than 2 years of paid long-term care. Typically, these costs aren't covered by Medicare, and if they are, it's generally for very short periods. In these situations, long-term healthcare costs can become significant over time.

Strategies for saving for healthcare

Once you have a general idea of the costs, you can start developing a strategy to help you save for potential future expenses. The good news is there are several ways you can save and plan for long-term healthcare costs.

Retain insurance until you're eligible for Medicare

Once you reach 65, you can sign up for Medicare. Until then, if you're offered health insurance by your current employer or through the government's Health Insurance Marketplace, consider maintaining coverage.

This helps in two significant ways. First, you'll be able to keep up with annual checkups, a crucial part of preventative care. Second, your insurance can help cover costs if you get sick or injured, so you're not paying out-of-pocket expenses before retirement.

Open a health savings account

Another way to save is through a health savings account, or HSA. It's a tax-advantaged investment vehicle that preserves money for future healthcare costs. Any contributions you make are tax-deductible, and the money in the account grows tax-free. Once funds are withdrawn, you won't pay any taxes if you use the money to pay for qualified expenses, such as doctor visits, eyeglasses, hearing aids and dental care.

Today, many employers offer HSAs as part of a benefits package, but you can sign up for your own if you enroll in an HSA-eligible insurance plan.

Purchase long-term healthcare insurance

No one likes to think about the possibility that they may need help with basic day-to-day activities, such as eating and bathing, but it's a reality for some.

Medicare doesn't typically cover the costs associated with getting in-home care through a visiting nurse or daily care in an assisted living facility. Paying these costs out of pocket could make a big dent in your retirement savings.

If you aren't sure you can cover these costs with your savings, long-term healthcare insurance is something to consider, as it can help cover the costs associated with in-home care, assisted living or nursing care, and adult day-care needs.

Focus on a healthy lifestyle

It's impossible to predict what your health will be 10 or 20 years down the road. However, what you can do right now is focus on having a healthy lifestyle for yourself and your family.

Any exercise helps, no matter how small. Try staying active a few times a week with low-impact exercises—walking, swimming and yoga are three good examples. Incorporate a well-balanced diet and drink plenty of water.

Don't forget mental health is important, too. Schedule activities with friends and work on reducing stress. Making a plan for long-term healthcare can be impactful, because feeling less stressed about your finances can help improve your health. The small changes you make now can pay big benefits down the road for your overall health.


A few financial insights for your life

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