Steve Coker, CFP
Healthcare in Retirement - Developing a Health Insurance Strategy
Several weeks ago we wrote an article outlining the basics of healthcare costs. This week we continue our conversation with strategies for health insurance during retirement. Since many Americans also get their health insurance through their employer, it can be difficult to leave both a paycheck and health insurance coverage. Although healthcare costs must be considered carefully, many successfully retire and still cover health costs.
The importance of healthcare insurance
Good insurance is the foundation for good health care. That doesn’t necessarily mean buying the most expensive policy, but as a financial advisor, I prefer health insurance that reduces the potential for large unplanned expenses. This means that I prefer health insurance with lower co-pays and deductibles, and that can be more expensive. While these plans can be more expensive, the premiums are known, and you can plan for them. In contrast, an unplanned medical issue that requires thousands or even tens of thousands of dollars of your savings each year can ruin you financially. These are the types of risks that are good to insure, especially during retirement. Let’s admit it, health care risks rise as we age.
Of course, buying health insurance is complex, and there are many factors to consider. Plans vary widely and there is much to consider beyond mere costs. For some, factors such as whether you can keep your existing doctor, and the general availability of doctors and hospitals in your area, are the most critical. If you have existing medical issues, you may want to consider the coverage for specific medical conditions or coverage for specific drugs that you are taking. Remember that there is often a cost to this type of flexibility. Therefore, buying insurance can be an exercise in trade-offs, and you must weigh the cost and benefit of the features that are most important to you.
Retiree Medical Insurance through your employer
Many large corporations offer retiree health coverage, and it is worth researching the benefits available through your human resources department before you retire. Ask about age or service requirements for retiree health coverage which could impact when you retire. Consider your benefits carefully since group retiree health insurance through your employer will likely be much lower than purchasing a policy on your own, even without any subsidy from your company. Of course, if the company shares part of the cost, the benefit could be worth hundreds of dollars every month, so working an extra year or two for this benefit may be worth it.