How to Handle Rising Health Care Costs when Retirement Planning

The cost of long-term care and general healthcare costs are higher than they have ever been, and the increase doesn’t appear to be slowing anytime soon. Medicare covers only a portion of healthcare costs in retirement, leaving you on the hook for what will likely be a significant chunk.

You aren’t totally powerless against this expensive burden, however. There are strategies and lifestyle design choices that can lessen the effect that these rising costs will have on you. Let’s look at five ways to handle rising healthcare costs when planning your retirement.

Annuity with Rising Income

It’s common knowledge that annuities are a tried-and-true method of funding a retirement. For the uninitiated, an annuity is a long-term contract between an individual and an insurance company which guarantees that in exchange for a lump-sum premium or a series of premiums the insurance company will guarantee an income stream that can last for a certain number of years – or even for an entire life.

What many people may not realize is that some annuities offer income streams that can increase over time. Generally, these incomes increase by a certain percentage per year, offsetting the effects of rising costs.

Life Insurance Policy Costs

Are you paying monthly premiums on a life insurance policy that you no longer need? Maybe you’re “over-insured”, or for some other reason, your loved ones aren’t as financially dependent on you as they once were. What you may not know is that you can be relieved of those expensive premium payments, and make money doing so.

A life settlement involves selling your life insurance policy to a company who will take over as owner and beneficiary. The settlement company will continue paying the policy premiums until your death, and in exchange, they will pay you a lump sum of cash, which you can use for whatever you see fit – including saving for healthcare costs.

Downsize your Home

Many retirees have the advantage of being free from mortgage payments by living in a home that is paid off. If you’re living in the home in which you raised your family, though, do you really need all that space? Even if you have no mortgage payment, a lot of your budget can be eaten up by property taxes, insurance, repairs and utilities.

For some, selling their home and downsizing is the answer. This can provide extra cash that you can invest or simply save for those inevitable medical costs which aren’t getting any cheaper.

Delay Retirement

There’s no rule that says you have to retire at a certain age, and many people are finding that working into their later years is rewarding and keeps them feeling young. Delaying retirement gives your assets more time to grow, and every year that you remain in the workforce lessens the burden on your portfolio to take you through your final years.

You don’t have to continue working full-time, either. Some employers allow workers to ease into retirement by going from full-time to part-time. You may also find a new “side-hustle” that gives you pleasure and brings in some extra money in the process. Reaching retirement age doesn’t necessarily signify the end of your money-making years.

Stay active and healthy

You may not have control over the cost of healthcare, but the extent to which you need it can be determined in part by your lifestyle choices – even though you could be approved without a medical exam. Staying active, eating a nutritious diet, and limiting unhealthy behaviors can help keep you out of the doctor’s office and hospital. This means less of your retirement dollars going to medical bills, freeing up cash for what you choose to do with it.