Factoring Increasing Medical Costs Into Retirement - Scott on MONEY

Regardless of where you live, the sad truth about the medical field is that it?s expensive, whether you?re seeking surgery, purchasing prescriptions pharmaceuticals, or simply going in for annual check-ups. While some countries seem to have done it right by offering government-subsidized health care (social medicine), it?s not like the population is off the hook for footing the bill; they simply pay through elevated taxation rather than shelling out the dough for insurance. Of course, the nice thing about a social system is that retirees that have paid into the system for their entire career can reap the benefits once they stop working (only those earning an income have to pay taxes). But since we have yet to implement such a system, retirees will have to continue to pay for the rising costs of medical care, whether they have insurance or not.

But how can you factor in such costs to your retirement budget when you don?t have the first clue what they will be? For most people contemplating giving up the working world and taking it easy in their twilight years, the monthly bill situation will remain more or less the same. At this point in life, many people have finally paid off the family home, so while they still have homeowners insurance and property tax to worry about they can basically account for these expenses when creating a budget for their newly fixed income. And while utilities and other bills will almost certainly increase somewhat over time, the hikes are unlikely to be significant year upon year. Ditto on the cost of food and transportation. Although all costs are subject to inflation, this is something that can more or less be planned for by following past trends.

But medical expenses are a different story and the main reason revolves around insurance companies. These healthcare policy providers have near total control over how much you?ll pay for the privilege of enjoying medical care. The older you get, the more your rates will go up. But while you can rely on rate hikes as you age, you cannot necessarily predict how high they could get. Suppose, for example, that you are diagnosed with a progressive and incurable disorder like hepatitis C. Your insurer has the right to raise your rates. And it?s not like you can just go shopping for a better deal. Once you have been diagnosed with such a disease it is considered a pre-existing condition, which could make it exempt from payout when you elect to sign with a new insurer. Or what if you have a disability that leaves you in need of a wheelchair and ongoing nursing care? Your insurance provider may cover the costs initially (especially if you find discounts through sites like 1800wheelchair), but your rates will likely go up as a result.

And of course, even the best insurance won?t cover everything; you will still have to pay a portion out of pocket. So how can you go about accounting for these unexpected costs in order to plan your budget accordingly? In truth, you can?t. But you can strive to live within your means and continue to set money aside during your retirement. You probably have a few options when it comes to drawing from retirement and pension accounts, and your best bet is to take the least amount of money that you can comfortably live on (accounting for inflation) in order to avoid paying taxes and keep that money earning compound interest as long as possible. That way, you?ll have it on hand when medical costs arise.

Tagged as: aging, insurance, medical care, medical costs, retirement

oaksterdam the fray national anthem dallas tornado ncaa basketball oikos kentucky wildcats oakland school shooting