Don’t forget to include Medicare in your retirement plan

Working toward financial and physical health in retirement

Have you ever come across one of those online quizzes that suggests how much money you’ll need to save for a fulfilling retirement? Was the number a scary one?

Whether you grew up always saving for a rainy day, or you’re trying to catch up before that rainy day gets here, consider that financial health and physical health often go hand in hand.

That’s why your retirement planning should always take into account the role that Medicare will play in your long-term security.

Medicare coverage is neither free nor does it cover everything

For example, Original Medicare doesn’t cover common healthcare expenses like most prescription drugs. Nor does it cover hearing aids, dentures, routine foot care, or exams for prescription glasses.

And Medicare, as valuable as it is, isn’t free. While most people who’ve worked and paid taxes pay no monthly premium for Medicare Part A, there are still deductibles and copays for hospital care. In 2019, that deductible is $1,364.

For Part B medical coverage for doctor visits, in 2019 the monthly premium is $135.50. There’s also a deductible of $185 and copays when you visit the doctor. And Part B medical coverage does not include coverage for prescription drugs.1

To help handle the rising cost of prescription drugs, you can opt for a stand-alone prescription drug plan, or choose a Medicare Advantage plan that includes that coverage.

Taken one at a time, these numbers may seem manageable, but your healthcare needs can change over time, or overnight, so now is the time to know your options.

Retirement savings and private insurance may help fill the gap

One strategy that may help make your retirement healthcare more affordable is to put off your retirement date. Delaying your retirement may give you more time to build up your savings.

Also, waiting to collect your Social Security benefits until after you reach full retirement age can increase the amount of your monthly check until you hit age 70.2

You can use some of that extra savings for Medicare premiums, out-of-pocket healthcare expenses or supplemental insurance. Private insurers sell Medicare supplement insurance, also known as Medigap, to help pay some of the costs not paid by Medicare.

To purchase a Medicare Supplemental insurance policy, you must have Medicare Part A and Part B. You’ll pay a monthly premium for the policy, in addition to your Part B premium for Medicare. As long as you pay the premium, your supplemental policy can’t be cancelled.

A financial adviser can help evaluate your potential retirement healthcare needs, plan a budget and consider all your funding options. You can also find healthcare cost estimators online to give you a rough idea of your targets.

You don’t have to go it alone

With 10,000 baby boomers aging into Medicare every day, a wealth of resources have sprung up to help them manage the transition.2

A financial advisor is a good start. He or she can help evaluate your potential retirement healthcare needs, plan a budget and consider all your funding options.

You can also find healthcare cost estimators online, opens new window to give you a rough idea of your targets.

Sources

  1. “Medicare 2018 Costs at a Glance,” Medicare.gov, last accessed May 2019, medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html, opens new window.
  2. “Can You Take Your Benefits Before Full Retirement Age?” Social Security Administration, last accessed May 2019, ssa.gov/planners/retire/applying2.html, opens new window

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