Prepare for the Unexpected: Dealing with Out-of-Pocket Medical Costs

Life is full of surprises; unfortunately, some can come with hefty price tags. Even the wealthiest individuals can find themselves grappling with unexpected medical expenses. Healthcare costs can be unpredictable, and in today’s world, they continue to rise. That’s why weaving healthcare into your overall wealth plan is crucial. 

Let’s explore three often overlooked strategies to safeguard your financial well-being in the face of unexpected medical bills.

Financial Safety Strategies

Factor in the Loss of Human Capital

When a health crisis strikes, it’s not just the immediate medical expenses that can drain your finances. There’s a ripple effect that’s often underestimated – the loss of human capital. This includes the injured or ill individual’s lost earnings and the potential future income they would have generated. The income is lost if a family member needs to take time off work to become a guardian.

For example, consider a working couple with a combined annual income of $1.2 million. Their household income may decrease by 50% if one partner sustains an injury that prevents them from working for six months. As a result, they can be forced to use their savings to pay for daily necessities. These options must be considered in your wealth plan. To lessen these risks, consider short- and long-term disability insurance.

  • Short-Term Disability: Typically, there’s a 10-day waiting period, during which sick and vacation time can be used. It covers a portion of your base salary, not incentives. Benefits typically last for three to six months.
  • Long-Term Disability: This comes into play once short-term disability expires. Like short-term disability, it covers a portion of your base salary, excluding bonuses and stock incentives. It usually includes a waiting period of 3-26 weeks.

Take Advantage of Healthcare Savings Accounts (HSAs)

Besides insurance, you can also build a financial cushion for medical expenses through Healthcare Savings Accounts (HSAs). These accounts offer several advantages:

  • Triple Tax Savings: Contributions and earnings are tax-free, and withdrawals for qualified medical expenses are tax-free.
  • Tax Deductions: You can claim a tax deduction for your contributions, even if you don’t itemize your deductions.
  • Portability: HSAs stay with you, even if you change employers or leave the workforce.

To be eligible for an HSA, you must be covered under a high deductible health plan (HDHP) and not enrolled in Medicare or claimed as a dependent on someone else’s tax return.

Plan to Age 100

Many people underestimate the financial impact of healthcare expenses in old age, especially those who invest more in preventative care and enjoy longer life expectancies. Medical conditions like cancer or dementia can erode your wealth, even if you’re wealthy.

When planning your lifestyle and cash flow, you must account for healthcare costs up to age 100 to avoid outspending your assets. Long-term care (LTC) insurance can be an invaluable piece of this puzzle. It can cover expenses like private nursing home rooms, which can cost up to $400,000 annually in some regions. Multiply that by a two-to-three-year stay, and you’re looking at potential costs in the millions. So, consulting an advisor is advisable to plan for an unexpected expense.

Final Verdict

Your health is linked to your wealth, and it’s vital to incorporate it into your financial planning. While you can’t prevent health events, you can prepare for them. This proactive approach will safeguard your lifestyle and future aspirations, such as philanthropy, discretionary spending, and wealth transfer goals. Planning for the unexpected can bring peace of mind about what lies ahead.

And yes, the best thing for you is that one partner can help you navigate medical expenses. RxPowered, your trusted partner in healthcare, connects you to the best medicine at the best rates from over 70,000+ pharmacies. 

By joining forces with RxPowered, you can enjoy up to 90% discounts on your prescriptions. When you’re prepared for the unexpected, you can confidently face life’s surprises, knowing that you have RxPowered in your corner. 

Don’t let medical expenses catch you off guard. Plan and save big with RxPowered. Your financial well-being deserves nothing less.