Stress Test Retirement Plan for Medical Expenses | Financial planning

I know we are all tired of COVID-19, but given the current pandemic and increasing medical costs, it is more important than ever to ensure proper planning for medical expenses in retirement. Many financial plans ignore the day-to-day costs, let alone the potential for a financially catastrophic long-term care stay. Many workers miss out on the opportunities to save for these expenses.

Medical premiums and health insurance

Many people do not include medical insurance in their budget because the expenses are automatically deducted from their paychecks during their working years. In retirement, not only do you have to pay for Medicare Part B, you also have to pay extra. And if you exceed a certain income threshold, your Part B premium will increase.

Advantage plans get a lot of attention because of their low premiums, but you can end up with high medical bills if you need services they don’t cover. Hire an insurance agent to make sure you choose the best plan for your situation. Your insurance cost does not increase if you use an agent, and their knowledge and expertise can save you big money in the long run. And of course, don’t forget to include the cost in your retirement budget.

Long term care

Many retirees think they have enough assets to have a comfortable retirement, but when their plan is stress tested for a long-term care incident, the healthy spouse often has to make significant adjustments to their lives. his lifestyle. Long-term care insurance creates a more solid and holistic plan, while providing assistance during difficult times. There are two types of plans: The traditional plan works like liability insurance in that if you don’t use it you lose it and it comes with high premiums. The new hybrid plan offers a life insurance component that pays your beneficiary if you do not use long term care insurance. You can also get most, if not all, of your money back through these policies if you change your mind.

Health savings accounts

During your working years (and while you are in good health), you should consider contributing to a health savings account. Your employer must offer high deductible medical plans that qualify for this type of account. Once the account is opened, you will benefit from a tax deduction for your contributions. The strategy is to invest the contributions in the account instead of using them to cover routine medical expenses. Investment growth is not taxed when there is a distribution as long as it is used to pay qualifying medical expenses. Often times, the employer will also contribute to the HSA on your behalf – free money.

Failing to plan for medical expenses for retirement is one of the biggest omissions I see. Not only will these expenses stay with you throughout retirement, they will likely increase with age. Start saving today for a more secure future.

Securities offered by Royal Alliance Associates, Inc., FINRA / SIPC member. Investment advisory services offered by NCA Financial Planners. RAA and NCA are not affiliated. Mayfield Heights, 440-473-1115, NCAfinancial.com.


Jasmina Tadic is Senior Financial Advisor at NCA Financial Planners in Mayfield Heights.


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