One of the major concerns for retirees or individuals approaching retirement is healthcare. As people live well into their 80’s and 90’s healthcare can have a drastic impact on retirement planning. Fidelity Investments has done a study on healthcare expenses during retirement. The study demonstrated that a couple aged 65, will need approximately $280,000 to cover healthcare expenses over the course of their retirement. That number can vary based on how healthy a person is and potentially where they live.
Regardless, healthcare in a retirement is a major, major factor to take into consideration. While thereare many ways to plan for healthcare in retirement, this newsletter willfocus on Medicare and give the basics. Each persons’ situation is unique and we highly encourage working with an advisor to help create strategies to help manage healthcare expenses in retirement.\What is Medicare?
Medicare is a government sponsored healthcare program for individuals only. Individual is the key termbecause only an individual can file for Medicare and not couples. A person turning 65 years old or anindividual with a disability are eligible for Medicare. Medicare consists of four parts, each part covering a branch of our healthcare system. For simplicity, our healthcare system can be divided into hospital stays, outpatient visits, prescriptions, and other areas such as skilled nursing and physical therapy.
Here is the breakdown of Medicare coverage. Not the full extent, just the basics.
Part A: Covers your hospital visits-The actual stay in the hospital.\
Part B: Covers most of your outpatient care- Think of your primary care physician.
Part D: Covers your prescriptions.
Part C: Medicare Advantage or Private Medicare-This is Medicare approved insurance that is offeredthrough private insurance companies-Think of HM0’s or PPO’s. You may need to see a doctor within acertain network.
Quick note: In depth details of coverage can be found by visiting http://www.medicare.gov.
When planning for retirement, it’s important to remember that Medicare eligibility does not begin untilage 65, so if you are planning to retire before 65, you will need to set aside money specifically for yourmedical coverage. You may need to have an HSA or Health Savings Account or some other financialinstrument to cover your costs.
Another important factor that retirees face in regards to paying for Medicare is while Medicare Part A is free (technically free since you paid for it through your working life), premiums for Medicare Part B are covered through social security. If you’re not collecting social security and start Medicare Part B, you willneed to find a way to pay for those premiums.
Healthcare can be a challenge when planning for retirement, but it’s important to put Medicare into your financial plan. There are other factors to consider as well such as how do you pay for costs not covered by Medicare or how do you pay for long term care if you should end up in a nursing home? How do you protect assets from a nursing home? What if your spouse needs long term care? There are many variables that can impact your plan, but the good news, there are strategies that can help you better prepare you for a healthcare in retirement. Feel free to reach out to the CFE Finances.Com team if you have questions.
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