Surviving the Retirement Healthcare Hike: Practical Tips for the Modern Retiree
During the COVID-19 pandemic, telehealth became more popular and accessible, providing a convenient way for patients to connect with their doctors.
Despite recent decreases, medical care is still nearly 30% more expensive than a decade ago. This presents a significant hurdle as you step into your retirement. But with understanding and proactive management of these costs, you can reduce worries and secure your retirement.
Understanding the Healthcare Landscape in Retirement
As you transition into retirement, it’s essential to understand the evolving landscape of healthcare costs. Medical prices have risen faster than other consumer costs, and as you age, your need for medical care naturally escalates. To give you a clearer picture, a couple who retired last year is projected to spend an average of $315,000 on healthcare costs throughout their retirement, excluding long-term care.
Tackling the Twin Challenges: Market Volatility and Healthcare Expenses
In your retirement, you’ll likely face the twin challenges of market volatility and unpredictable healthcare costs, known as “spending shocks.” These unexpected expenses can pose a risk to your financial stability, especially during periods of market fluctuations.
Market volatility refers to the speed at which the prices of investments move up and down within a market or index. When the market is volatile, it can lead to larger-than-normal fluctuations in your retirement portfolio’s value, which could affect your retirement savings if you need to withdraw money at a time when your investments have decreased in value.
Practical Strategies to Counter Healthcare Costs
- Boost Your Social Security Benefits
One helpful strategy is to postpone claiming your Social Security benefits. By doing so, you can significantly increase your monthly income. For instance, the average retirement benefit in 2023 is $1,827 per month. But if you wait until full retirement age (currently between 66 and 67), this figure could leap to $3,627 monthly. This considerable increase can help you cover your healthcare costs more comfortably. - Create a Reliable Financial Safety Net
Another essential strategy involves creating a cash cushion, a reserve of cash you set aside to cover living expenses during prolonged market downturns. While the suggested size of this cushion is typically one to three years’ worth of expenses, there are other options you could consider, such as setting up a home equity line of credit or a pledged asset line of credit. These options use your home or investment account as collateral and provide additional financial flexibility. -
Become an Empowered Patient
Lastly, becoming an empowered patient can significantly reduce medical costs. In other words, you become active in your healthcare decisions and understand and question the necessity of medical tests and prescriptions before accruing costs. By taking a proactive role in your healthcare and making informed decisions, you can control your healthcare expenses more effectively.
Unearthing the Multiple Benefits of Working in Retirement
Beyond these strategies, consider the many benefits of working part-time during retirement. It not only provides additional income but also offers numerous other advantages.
Staying active and socially engaged through work can significantly improve your mental health, providing a sense of purpose and community. This can be crucial for maintaining cognitive health and delaying the onset of age-related cognitive decline.
Furthermore, depending on your employer, continued employment may afford additional health benefits, potentially lowering your out-of-pocket healthcare expenses. It’s an avenue worth exploring.
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