3 Ways Your Healthcare Decisions Can Impact Your Finances In Retirement

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The past year has been fraught with financial instability as the coronavirus made its mark on the nation. Unpredictable movements in the world’s economies have had individuals anxiously watching their pockets as they save for retirement. 

As you get closer to retirement age, you might be considering changing your healthcare plans to reflect your current needs. While you’re keeping your eye on your health, remember to keep another on your accounts because there are three impacts that healthcare coverage changes can have on your retirement plans.

1. Additional Unexpected Costs

As your health needs change over time, you’ll require healthcare coverage that can provide all the necessary benefits. The health issues often brought on by advancing age often coincide with rising costs to address them. For example, a retiree will require, on average, $135,000-$150,000 to cover costs that Medicare will not. Such expenses, which you may be unable to predict, can dig deeper into your savings than you might expect.

For current and future retirees, ensuring they’ve got their future needs covered amidst the chaos of the pandemic is a stressful task. “As we grow older, our needs change, and how you address these changes can have broader ramifications on your retirement accounts,” notes Ty J. Young, owner of a wealth management firm. “If you have made changes to your Medicare coverage during the Annual Election Period this year, you might have impacted your financial planning as well.” To determine how changes to your health coverage could have altered your retirement plans, you may wish to consult your financial advisor.

2. Increased Savings

On the upside, a change in healthcare can also be a boon for your finances. Even if your health requires more care, switching to a more appropriate plan can cover more treatments and lower your out-of-pocket costs. For example, if you’re on Medicare and have multiple prescriptions, enrolling in a Part D plan can help pay for them. In this case, not having this plan could cost you more in the long run.

Another result of switching insurance plans can be a lower deductible, which means less cost for coverage in the short term. It can also change the coinsurance you pay after the deductible and lower your copayments as well. Be sure to take stock of where your money is going in each scenario, either on your own or with the help of an advisor. This examination will clarify which plan decisions can save you the most and provide the best coverage.


3. Less Predictability

Depending on the changes you make to your healthcare plan, your coverage in the future can become uncertain. While Medicare Advantage (Part C) plans provide additional benefits beyond Original Medicare, coverage is a bit more fickle. These are Medicare-approved plans offered by private companies, which means that benefits are subject to profit-based changes. The Annual Notice of Change may reveal that your doctor is no longer in network, for example, or the plan’s drug formulary doesn’t include your prescription anymore.

With a low-premium Advantage plan, “you’ll need to spend more out of pocket for services your plan covers (through copayments and coinsurance) before receiving 100% coverage—especially on zero-dollar plans,” warns David Haass, co-founder of MedicareFAQ. “Thus, it’s difficult to predict what your health care will cost for the year ahead.” Switching to Original Medicare with a Medicare Supplement (aka Medigap) policy, on the other hand, may make your coverage more predictable. The latter will also cover you if you travel overseas, which is not the case for either Medicare Advantage or Original Medicare.

Knowing the impacts of changing healthcare coverage is paramount when it comes to getting the care you need at a cost that won’t drain your retirement funds. When the Annual Election Period comes around, don’t neglect to do some research before deciding whether to switch healthcare coverage or not. Either way, you’ll be much more prepared for the future.