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It’s no secret that healthcare becomes a bigger concern for most of us as we grow older. More ailments are likely to develop, which means more money is spent to visit health professionals and purchase medications. Even if you remain healthy through your later years, the costs of preventative care and preparing for potential, unexpected health challenges continue to rise.

Health-related expenses will likely be one of the biggest components of your retirement budget. You need to be prepared to pay for comprehensive insurance coverage and potential out-ofpocket costs. Here are three strategies to help you manage these critical expenses during retirement.

Understand How Medicare Works

The good news for Americans ages 65 and older is that you qualify for Medicare. That makes increased dependence on healthcare services more affordable. At age 65, most people automatically qualify for Medicare Part A at no cost, which primarily provides coverage for hospital stays and skilled nursing care. Medicare Part B must be purchased (approximately $109 per month in 2017 for most retirees). Part B covers the costs of visiting a physician — but with some deductibles. Many people purchase additional coverage to use for outof- pocket expenses, such as a Part D prescription drug plan or a Medicare supplemental policy.

Timing is important. Signing up when you first qualify for Medicare coverage will keep costs at their lowest level. If you maintain insurance through your employer after age 65, you can delay Medicare enrollment with no risk of penalties.

If you retire prior to age 65, you will need to purchase insurance on the open market to cover health-related expenses until you become eligible for Medicare. Individual coverage tends to get more expensive as you age, so work the cost into your retirement budget. Some employers offer retiree health insurance as a benefit. Check with your human resources department.

Allocate Sufficient Funds for Healthcare Costs

As you develop your retirement income strategy, make sure you have money set aside for health expenses that will be your responsibility. By one estimate, the average 66-year-old couple will need to tap more than half of their lifetime pre-tax Social Security benefits to pay for healthcare expenses throughout retirement. Most people will likely have to rely, in part, on their own savings to help offset some medical expenses.

Along with other retirement savings, you may want to establish a health savings account (HSA) during your working years. HSAs are designed to help build tax-advantaged savings to pay for outof- pocket medical expenses you incur during your working years. However, any leftover funds can be applied to health expenses later in life, including premiums for Medicare and long-term care insurance. Keep in mind that you must be enrolled in a high-deductible health plan to open an HSA.

Focus on Your Own Health

Keep healthcare costs under control in retirement by creating or maintaining a healthy lifestyle. Small changes you make today, such as being physically active and eating right, could reduce the likelihood of medical issues. According to the American Heart Association, healthy changes could help you save $500 a year!

Having a plan doesn’t guarantee that you will avoid heath issues, but you may find it comforting to know about the most cost-effective ways to tackle healthcare expenses in retirement.

MICHAEL W. K. YEE, CFP
1585 Kapiolani Blvd., Ste. 1100, Honolulu HI 96814
808-952-1222, ext. 1240 | michael.w.yee@ampf.com