Thursday 19 December 2013

Taking Care of Health Care Costs: What You Need to Know

Accepting reality allows a person to contribute to their present circumstances in healthy ways. Believe it or not, this simple principle is essential to managing health care costs.

1. Accept the fact that as your age, your health will need more care, and the cost of maintaining your health will rise.
Many people simply act as if health care costs will remain as they presently are, or that after retirement, the government will pay for it. In today's dollars, a person can expect to pay $220,000 towards their health care costs after age 65 over and above what Medicare will cover.

2. Accept that the single biggest cause of retirees burning through their retirement assets is long-term care.
This is the cost of being taken care of either at home or in a nursing facility when a person cannot perform at least two of the five assisted daily living activities which are: eating, dressing, continence, walking, and bathing. The single best financial product to cover those charges is long-term care insurance or LTCi. A well-chosen LTCi policy purchased when a person is in their 50s will lock in a relatively low premium and provide invaluable services should a person need long-term care at any point after purchase of the policy, but it is also retirement asset insurance. Much of the costs a person may incur in health care costs after retirement (see item #1) are actually a result of needing long-term care.

3. Accept the option of a High Deductible Health Care Plan (HDHP) for health insurance if your employer offers you that choice.
Despite the high deductible, which in 2013 is $1,250 for an individual & $2,500 for a family, the insurance actually ends up being more affordable than traditional HMO or PPO options. More importantly, a HDHP allows a person to open up a Heath Savings Account (HSA). Money saved in the HSA is completely tax free and never expires or is forfeited as with a Flexible Savings Account (FSA). This is because you own the HSA account and the funds saved in it can remain in the account for years. The HSA can be funded as a source for health care related costs during retirement. Also, funds can be withdrawn from a HSA using personal checks or a debit card. Personal checks can be made payable directly to the treatment provider or written to oneself to reimburse for qualified expenses. Using personal checks is a great way to keep track of where your money is going. 

4. Accept that improving your health now is the single most important long-term savings in present and future health and dental expenses.
Managing weight, turning away from vices, and embracing healthy physical activities now not only improves quality of life, but can make the difference in avoiding crushing health care costs tomorrow.

You should be able to clearly see that your role in managing health care costs is the biggest factor towards enjoying a long and prosperous life. Health is the most valuable asset anyone has and, if lost, no amount of money or prestige on earth will restore it.

Do you have have any questions or suggestions? Write in comment section.

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