When it comes to common money worries, paying for healthcare is the number one financial concern for seniors. With the cost of healthcare for retirees climbing to $285,000, healthcare costs have now become an integral part of financial planning as a senior.
As a result, many seniors are now seeking ways to pay for their heightened healthcare costs- particularly if they choose to move abroad. According to estimates from the State Department, the number of American expats is approximately 9 million and rapidly rising.
While many seniors confirm a significant perk to moving abroad can be the lower healthcare costs, they still have to come up with ways to foot the costs in their older years. From securing international health insurance policies to budgeting for healthcare in their retirement budget, here is how seniors are managing their healthcare costs as expats.
Relying On The Country’s Public Healthcare System
Many seniors are also tapping into the public healthcare system as expats.
According to the Expat Insider survey, 39 percent of the seniors relocating abroad claim that the public healthcare system in Spain is easily affordable compared to other national averages. The ‘Sistema Nacional de Salud’ (SNS) provides free basic and emergency care.
Meanwhile, people in other countries like Costa Rica can benefit from the state-provided system in exchange for a small income-based contribution.
Elsewhere, in Mexico, senior ex-pats can enroll in the IMSS for a $400 charge per year. The requirements state that you must be a permanent or temporary resident and contribute for at least 4 weeks. The coverage for IMSS lasts for up to 52 weeks and extends to primary care, hospital expenses, and surgery.
In an article published by the Associated Press expat and Mexico resident says he and his spouse pays $80 per month for IMSS, Mexico’s public health system. However, they also use private healthcare for most needs and continue to pay out of pocket. Even then, the cost is minuscule compared to the costs they would pay if living in the U.S. For instance, treatment for a motorbike accident would cost $20 in Panama.
Senior Expats Can Secure International Health Insurance Coverage
Expats living in countries like Spain and Germany can also subsidize the gap in public healthcare coverage with international healthcare insurance or senior expatriate insurance policies.
Most people may choose to buy a global health insurance plan which covers them across the world on their travels.
Some of the most commonly chosen plans include Cigna Global’s Medical plan and IMG’s Global Medical Insurance Plan. For those choosing to purchase an international health insurance plan, it is important to look for the gaps in your coverage.
When choosing a global health insurance plan, look for a plan that covers the destination or destinations you intend to travel to. There are also three kinds of insurance policies to choose from: local health insurance, travel insurance, and international health insurance.
You will also want to tailor your plan to your medical needs. Most insurance plans will cover hospital visits and emergency medical evaluation. However, if you have an existing medical condition or want to include coverage for dental care or private accommodation you can personalize your policy.
Many Seniors Are Dipping Into Their Savings
Many seniors are also having to supplement their healthcare costs with their own savings.
In a study by Gallup and West Health, seniors were shown to have withdrawn $22 billion from their long-term savings for healthcare-related costs.
The report also showed that the average amount withdrawn and used was $3,789. Americans have also borrowed $88 billion to cover healthcare costs in the last year.
For seniors living in the US, Medicare coverage kicks in at 65. However, seniors can amend their state health plan coverage choices if their annual plan of notice (ANOC) indicates an increase in premiums or if they have plans to be expats in the coming year. Medicare coverage does not extend beyond the U.S. for longer than 6 months.
Unfortunately, borrowing to pay for healthcare is no longer uncommon due to the rising costs of healthcare and prescriptions. In fact, a recent blog post by Fidelity Insurance has advised younger Americans to begin incorporating the costs of healthcare into their retirement budgets.
Americans can also benefit from using a health savings account (HSA). Only 45 percent of those who had qualified for an HSA have gone ahead and opened one, according to an article published in the Journal of Financial Service Professionals.
More Seniors Are Turning To Credit To Pay For Medical Costs
According to research from CompareCards.com, one-third of consumers have credit card debt due to medical bills. Around 60 percent of them also said they turned to credit cards because they had no other way to pay for their medical costs.
In fact, medical expenses and credit card debt are two of the leading debt categories for seniors today.
Because of this, senior expats also turn to private insurance.
One good example of this is if you have not been a resident of the U.S. for the last five years.
The alternative to accessing Medicare in this instance is to pay for Part A premiums yourself based on the work credits you have earned so far. For 2021, one work credit is equivalent to $1470 in earnings. For those that earn 30 to 39 work credits, they can pay around $259 per month in premiums.
How Seniors Can Plan For Their Increasing Healthcare Costs
Whether you are moving abroad or staying in the U.S. the first step to effectively planning for your healthcare costs as a senior is to find out what your healthcare options are.
A common misconception many seniors have is that Medicare covers all healthcare costs in their later life. However, Medicare does not cover long-term daily home or facility care for most.
There is increasing evidence that most home care healthcare expenses are being paid out of pocket. For seniors and those approaching this stage, this has increased the importance of placing more emphasis on healthcare savings when deciding how much to save for retirement.
According to Fidelity’s Retirement Health Care Cost Estimator, the average couple may need up to $300,000 (after tax) for their healthcare expenses in retirement. This of course is heavily influenced by your health, your retirement location, and your retirement income.
Enroll in an HSA
Enrolling in a HSA is a good place to start. If your employer offers an HSA, enrolling early can also help you collect employer contributions. Savings into an HSA are tax-free but they are subject to eligibility rules on qualified medical expenses.
Understand Your Medicare Coverage
It also helps to know your Medicare coverage and its extent. According to the rules, you become eligible at 65 but you would still need to consider the different plans such as Medicare Advantage and Medigap supplemental gap insurance policies.
Keep a U.S. Bank Account
Successful ex-pats have also shared their own tips for managing the costs while living abroad. Among them is the recommendation to keep your U.S. bank account open even while living abroad.
This is to enable payment of your Social Security benefits which can help to offset medical expenses and monthly insurance premiums.
Other Tips
They also recommend having a checkup before leaving the U.S. to avoid being caught in a healthcare emergency while abroad. If you plan to visit family in the U.S. in certain states, you may wish to enroll in that State’s Obamacare plan, or Health Exchange, where you can use a relative’s local address. Pay close attention to unique residence enrollment criteria, as these may vary.
Final Thoughts
The sooner you incorporate saving for healthcare costs into your retirement and moving abroad budget, the better. Medicare may make sense if you plan on going back and forth or returning to the U.S. in the future. However, you should remain aware of your enrollment period for applying for Part A and B when you turn 65- even if you live abroad. If missed, you may face a late enrollment period penalty of up to 10 percent.
As the costs climb, the need for solutions to help seniors manage their healthcare costs will only continue to become more apparent.
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