Healthcare, Medicare and Retirement-Where to Begin?

One of the biggest concerns for retirees or people approaching retirement is healthcare. With many Americans living well into their 80s and 90s, healthcare costs can dramatically affect retirement planning. A Fidelity Investments study found that a 65-year-old couple will need roughly $280,000 to cover healthcare expenses over the course of retirement. That figure varies based on health and location. Regardless of the exact number, healthcare is a major factor to plan for. While there are many ways to prepare, this newsletter focuses on Medicare and covers the basics. Each person’s situation is unique, and we strongly recommend working with an advisor to build strategies for managing healthcare costs in retirement. What is Medicare?

Medicare is a federally sponsored healthcare program for individuals — the key word being individuals. A married couple cannot file jointly for Medicare; each person enrolls on their own. Eligibility begins at age 65, and people with certain disabilities may qualify earlier. Medicare is made up of four parts, each covering a different slice of the healthcare system. Broadly, that system breaks down into hospital stays, outpatient care, prescriptions, and specialty services such as skilled nursing and physical therapy.

Here’s a quick breakdown of Medicare coverage — just the essentials. Part A: Covers hospital stays — the actual inpatient stay in the hospital. Part B: Covers most outpatient care — think of your primary care physician visits. Part D: Covers prescription drugs. Part C (Medicare Advantage): Private Medicare plans offered through approved insurance companies — think HMOs and PPOs. You may be required to see doctors within a specific network.

Quick note: more detailed coverage information is available at http://www.medicare.gov. When planning for retirement, remember that Medicare eligibility doesn’t begin until age 65. If you plan to retire earlier, you’ll need to set aside funds specifically for medical coverage in the gap years — often through a Health Savings Account (HSA) or another dedicated financial vehicle. Another factor to keep in mind: although Medicare Part A is technically “free” (you funded it through payroll taxes during your working years), Part B premiums are typically deducted from your Social Security check. If you haven’t started collecting Social Security when you enroll in Part B, you’ll need another way to pay those premiums.

Healthcare can be a challenge in retirement planning, but Medicare belongs squarely in your financial plan. Other questions to think through: How will you cover costs not included in Medicare? How will you pay for long-term care if you end up in a nursing home? How do you protect assets from nursing home expenses? What if your spouse needs long-term care? There are many variables, but the good news is there are strategies to help you prepare. Feel free to reach out to the CFEFinances.com team with questions. Thanks for reading! CFEFinances.com