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Medical Expenses In Retirement (Can You Afford It?)

3 Minute Read

As you map out your long-term retirement savings goals, don’t forget one crucial element: medical expenses. A couple retiring this year can expect to pay $220,000 for medical expenses during their retirement, according to a health care study by Fidelity Investments.

How can you cover these costs? Examining all your choices is a long and detailed process, but here are three options to get you started.

Medicare Falls Short

Medicare is the government-provided health insurance program for people age 65 and older. If you’re eligible to receive Social Security retirement benefits, you’re also eligible for Medicare coverage beginning with the month you turn age 65.

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Most people believe Medicare will cover all their medical expenses in retirement. But Medicare focuses on medically necessary acute care such as doctor visits, medication and hospitalization. A couple retiring in 2020 has a 50% chance that their medical expenses will exceed $260,000 for premiums, deductibles, copayments and prescription drugs—even with Medicare.

In addition, Medicare is facing long-term financial challenges. Congress is considering proposals such as an increase in the eligibility age, increases in premiums or reductions in coverage to cut costs. Unless you plan to retire in the next few years, your Medicare coverage could be very different from what retirees have today

Health Savings Accounts Can Fill the Gaps

If you have a high-deductible health plan before you enroll in Medicare, you can contribute to a health savings account (HSA). HSAs allow you to save and even invest money to use to pay for medical expenses tax-free. Currently you can contribute $3,100 for an individual or $6,250 for a family. After age 55, you can make an additional contribution of $1,000 each year.

Once you have Medicare, you can no longer contribute to your HSA, but you can use the money tax-free to pay for medical expenses not covered by Medicare.

Long-Term Care Insurance Is a Must

Another shock for some retirees is the fact that Medicare generally does not cover long-term medical care or custodial care to help with daily living activities such as dressing or bathing. By 2020, 12 million retirees will need some form of long-term care either in a nursing home or in their own homes.

Long-term care (LTC) insurance will prevent the costs of this type of care from depleting your retirement funds, You can even pay LTC premiums from your HSA.

If you’re 60 and don’t have LTC coverage, get it today.

Get Good Advice for a Strong Plan

The options you choose will depend on your own situation. Even the available choices will vary from state to state. You need the advice of an experienced insurance professional to help you design and manage a plan you can count on.

One of Dave’s insurance Endorsed Local Providers (ELPs) will help you examine your options and choose the ones that will provide the best care at a price your nest egg can afford. Find your insurance ELP today!

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