March 4, 2019by Stephanie Dwilson
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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