Why Retirement Health Planning Should Go Hand in Hand With Money Planning
Retirement health planning needs to go hand-in-hand with money planning.
That's why Marguerita Cheng, certified financial planner (CFP), CEO of Blue Ocean Global Wealth, has some simple advice for anyone planning their retirement: Have an income strategy that addresses healthcare costs.
Learn How: Hidden Expenses: Owning 2 Cars in Retirement Costs More Than You Think
Make Money: 6 Clever Ways Retirees Are Earning Up to $1K Per Month From Home
“Even if someone is blessed with excellent health, they shouldn't look to Medicare to cover vision, hearing or dental,” she said. “Instead, the strategy for having and using income during retirement needs to include a plan to cover medical expenses.
Real Advice From Real Retirees
A recent thread on Reddit's r/retirement subreddit raised the question of what to watch out for on both fronts when planning for retirement. One Redditor said it’s important to ask yourself if you have enough money and if you have enough health insurance.
The timing of Medicare is another big point of discussion among Redditors talking about retirement. One retiree said to plan to sign up as soon as you are eligible to potentially see lower rates. It may also help to establish a relationship with a primary care doctor and other medical professionals before you retire, in case they don’t regularly take on new Medicare patients.
Speaking of Medicare timing and retirement finances, another Redditor said they took Medicare as soon as they were eligible, and waited until age 70 to collect Social Security to receive a higher payout. Redditors, in a discussion about retirement planning, mentioned the importance of thinking about paperwork for healthcare finances before stopping work, and taking advantage of employer-sponsored plans for as long as possible.
Planning Ideas From Financial Pros
People plan their retirement income on one sheet of paper and their health coverage on another, then wonder why the numbers do not work, said Phillip Zagotti, a certified public account (CPA) and an attorney at North Star Law Firm.
“It is the same plan,” Zagotti added. “Every dollar you recognize as income in your early 60s carries a health insurance price tag, and you don't get the bill for two years.”
According to Zagotti, the question is not how much you have saved but rather what your income looks like in the years Medicare is watching, and whether that money sits in an account that pays medical bills without a tax hit. He said those two things heavily influence what your 60s cost.
Jacob Bayer, CFP, founder of Jacob Bayer Wealth Management, said he works backward when it comes to considering healthcare risk for retirement planning. What’s your family history? How long do you expect to live?
“That determines how much you need to set aside before you retire,” Bayer said. “Income and healthcare planning need to happen in the same conversation, not separately.”
Per Chad Cummings, an attorney and a CPA at Cummings & Cummings Law, healthcare is always the “elephant in the room” and many financial planners and estate planning attorneys neglect to address this issue proactively, resulting in stress and expenses which are totally avoidable with adequate planning.
“Medicare timing can create permanent mistakes,” he said. “Missing the correct enrollment window can produce coverage gaps and lifetime Part B or Part D penalties. I would verify Medicare eligibility, employer coverage, prescription coverage and enrollment dates long before selecting a retirement date, not after.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion: