Are you approaching retirement? Have you developed a projected retirement budget? If not, now may be the time to do so. It’s an important financial tool that can help you manage your spending and preserve your retirement assets. You can use your budget to plan for a wide range of expenses, such as housing, utilities, taxes, travel and more.
One expense that should be included in your budget is health care. Many retirees assume that Medicare will cover all of their health care expenses. The truth is there are many medical expenses that aren’t covered by Medicare. In fact, Fidelity estimates that the average retired couple will spend $275,000 on out-of-pocket medical expenses.1 That figure doesn’t even include the cost of long-term care.
If you don’t plan ahead, medical costs could blow a hole in your budget. The good news is you can take action today by developing a strategy. Below are a few of the types of health care costs you may face. Use these to estimate your cost exposure and build your budget.
Premiums, Deductibles and Copays
Many people assume that Medicare is free, since workers pay Medicare taxes. That assumption is partially correct. Part A, which covers hospitalizations, doesn’t have a premium. The other parts, however, do have monthly premiums. If you want coverage for things like doctor visits and prescription drugs, you will likely have a monthly health insurance premium.
It’s also important to remember that all parts of Medicare have deductibles and copays. The amounts depend on your specific policy. The more robust your coverage, the higher your premiums are likely to be. You can reduce your premiums by changing your coverage, but doing so may increase your deductible and copay.
Treatment Not Covered by Medicare
A wide range of services aren’t covered by traditional Medicare. Dental, vision and hearing services aren’t covered. The same is true of physical therapy and some types of mental health treatment. Even hospitalizations and skilled nursing care are only covered for short periods of time.
Fortunately, there is a program called Medicare Advantage that you can use to fill these gaps in coverage. Also known as Part C, Medicare Advantage allows retirees to purchase coverage from private insurers. These policies offer traditional Medicare coverage plus enhanced protection for additional services.
Of course, since Medicare Advantage is optional, it also comes with additional premiums. A wide range of Medicare Advantage policies are available, so it’s important to consider your specific needs, budget and objectives before you purchase a policy.
According to the U.S. Department of Health and Human Services, many retirees can expect to utilize long-term care at some point in their lives. The agency estimates that today’s 65-year-olds have a 70 percent chance of needing long-term care in the future.2
As you may know, long-term care can be costly. According to Genworth, the average monthly cost for an assisted living facility in 2017 was $3,750. The average cost of an in-home health aide was more than $4,000.3 Many retirees need long-term care for many months or even several years, and the costs can add up to be a drain on retirement assets.
You may want to consider purchasing long-term care insurance. You pay premiums to an insurer, which then covers some or all of your long-term care expenses. Most policies cover care provided either in a facility or in the home. Some even provide a death benefit to loved ones in the event that you don’t need the long-term coverage.
Ready to develop your health care funding strategy? Let’s talk about it. Contact us today at Sprouse Financial Group. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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