Planning for Health Care in Retirement – Are You on the Right Track?

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Are you planning for health care costs during retirement? If so, you may be like most people who are underestimating these expenses.

While Medicare Part A coverage is free for those who qualify, it only covers a portion of hospitalization. Other Medicare coverage is not free such as Medicare Part B, supplemental insurance, or prescription plans. In addition, you should consider other out-of-pocket health care costs when planning your retirement budget. It’s estimated Medicare will only cover 50-60% of your health care needs. The premiums and out-of-pocket costs will only continue to go up as time goes on.

In addition to health care costs, many fail to plan for long term care. Most long term care isn’t medical care. It involves help with basic personal tasks of daily life, often referred to as activities of daily living (ADLs). Many people don’t realize Medicare doesn’t cover long term care. Medicare does cover:

  • Care in a long term care hospital
  • Eligible home health services
  • Hospice and respite care
  • Skilled nursing care in a skilled nursing facility

Don’t Forget Health Care Costs in Your Retirement Budget

It’s common for retirees to fail to plan for health care in retirement. Especially after they enjoyed decades of their employer paying for most of their health care coverage. You may think you need the same amount of take-home pay you currently have but don’t forget about extra medical premiums and out-of-pocket costs when calculating health care costs.

Health Care Premiums in Retirement

When you retire, you may pay the following four health care premiums:

  • Medicare Part B – premiums may be higher if you make more
  • Medical Supplemental Insurance (Medigap) or Medicare Part C (Medicare Advantage)
  • Medicare Part D (prescription coverage) – premiums may be higher if you make more
  • Long Term Care Insurance – premiums are based on your age and health when you buy coverage

Don’t forget to factor in the costs for these coverages in your budget, including out-of-pocket health care costs. If you are married, multiply the numbers by two.

Keeping Health Care Costs Down

To help control rising health care costs, take good care of your health. See your dentist regularly as good dental care can lead to earlier diagnoses for medical issues, such as cardiovascular disease, which shows up first in your gums.

In addition, manage your distributions efficiently for tax purposes. This may help keep your premiums for Medicare Part B and Medicare Part D from rising as much. Health Savings Account (HSA), Roth IRA, cash value Life insurance policies, or income from reverse mortgages aren’t included in the formula to determine your Medicare Part B premiums.

Be sure to buy Long Term Care insurance while you are young and healthy enough to get coverage. Premiums can even be paid for with your HSA. If you are nearing retirement and are eligible to contribute to an HSA, contribute up to the IRS maximum each year to help pay for health care expenses in retirement.

Interested in creating a long term care plan for your future? Request information from a Long Term Care Specialist about your options today.

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