Stephanie Dwilson

How to Help Retirees Manage Health Care

A 65-year-old couple retiring this year will need $280,000 to cover their health care costs in retirement — and that number doesn’t include the cost of over-the-counter medicine, dental services or long-term care. This means that a good health care plan is an essential part of retirement financial planning.

Worries about medical emergencies and the costs that come with treating them can take a toll on employees who are nearing retirement age. But whether or not they have the budget to offer full retirement benefits, employers can help alleviate those fears. Here’s what you need to know.

Is It Worth Investing in Retirement?

If you can afford to offer health care retirement benefits to your employees, it can be a worthwhile investment. Stress is a productivity killer, and without having to take on the emotional burden of financial worries as they near retirement, your staff will have fewer distractions from their work. Plus, you shouldn’t underestimate the value of the loyalty good retirement benefits can bring you. A retirement package could help you attract and retain talent, even if you can’t meet the same salary that bigger businesses are offering.

Of course, not every organization can offer full retirement benefits. There’s no doubt they can be expensive, and they can be twice as costly if people retire before the age of 65. It’s understandable that some employers avoid offering them altogether. But even if you can’t offer full retirement benefits, you have other opportunities to help your employees with retirement.

5 Resources That Can Help Employees Plan for Retirement

Here are five resources that can help your employees as they consider how to approach health care in their retirement years.

  • COBRA. If employees want to stay on your health care plan after they retire, they might be able to continue using their employee health benefits through the Consolidated Omnibus Budget Reconciliation Act. This option can be expensive for the employee, and it only lasts for a limited time, but it’s a good temporary solution for employees who are about to retire and still want full coverage.
  • Medicare Advantage. Employees can purchase Medicare Advantage plans directly from private insurance carriers. The plans cover everything Medicare does, plus extra benefits like dental work, glasses, hearing aids and gym memberships, depending on the specific plan. Medicare Advantage plans will soon include more options, according to the New York Times, including health-related adult day care programs, home aides and home safety devices. As an employer, you can contact the Centers for Medicare and Medicaid Services or a private insurance carrier to offer a group Medicare Advantage plan through your business.
  • Long-term or in-home care insurance. Discounted long-term or in-home care insurance can be a huge help to retired employees. However, employees might not think about purchasing health care for retirees until they actually need long-term or in-home care. That’s a big mistake — the average age for purchasing this insurance is 57. Older employees may face higher premiums or need to get a smaller plan that fills in some gaps but has a lower daily benefit.
  • HSAs or HRAs. Health savings accounts (HSAs) provide a way for employees to save funds for medical expenses after they retire. You can offer HSAs with certain high-deductible health care plans, and you or your employees can put away a total of up to $3,450 pretax a year into an individual HSA — plus an additional $1,000 if the employee’s over 55. Balances accrue from year to year, and the money taken out is tax-free if used for qualified medical expenses. Another option is a health reimbursement account (HRA). These accounts are funded solely by the employer, with funds covering qualified medical expenses once employees have retired and meet other requirements.
  • Supplemental gap plans. These plans are secondary to Medicare, only kicking in after Medicare covers its share of medical costs. Much less expensive than a full health care plan, supplemental gap plans are a more approachable way for you to help out with retirement health care.

Just because you can’t offer all of your employees full retirement benefits doesn’t mean you can’t make their retirement financial planning easier. Offering help with medical costs through one of these five tools could make all the difference — a difference your staff will know who to thank for.

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