Even if you're currently in tip-top physical shape, it helps to get some key healthcare items in order before retiring.
If you plan to retire before becoming qualified for Medicare at age 65, you may want to make sure you are covered by health insurance in between employment and Medicare eligibility. And because Medicare does not cover everything, there are steps you can take now to help prepare for healthcare costs in the future. Health Savings Accounts and Long-term care insurance are additional options to consider as you plan for the years ahead.
Most retirees receive their healthcare through Medicare, the government health insurance program that's available to Americans who qualify beginning at age 65. While Medicare is a low-cost insurance option, it is not free and it only covers about 60% of total healthcare expenses for retirees. So you may want to take some time before you retire to familiarize yourself with how Medicare works. And here are some other ways to help prepare for future healthcare expenses:
Estimate healthcare costs: Consider creating a budget for your actual and projected healthcare costs for the years ahead. You can begin by breaking down annual costs for prescriptions, insurance premiums and deductibles, out-of-pocket expenses, any services not included in traditional Medicare (such as dental, vision and hearing) and any other healthcare costs that come to mind. Research how much of these costs will be covered by Medicare. Depending on your health and family history, you may also want to factor in projected cost of long-term care needs, which can be significant and are not covered by Medicare.
The following table shows that as a 65-year-old couple ages, monthly premiums and out-of-pocket costs will increase dramatically over the course of retirement. A fairly manageable $1,004 monthly expense will almost double by age 75 and grow to $3,153 per month — a 214% increase — by age 85.1