What Keeps You Up At Night?

For millions of Americans, it’s the question of how they will fund their healthcare expenses in retirement, according to a recent poll by Franklin Templeton. With the high costs of care, hospitalization, pharmaceuticals, and nursing homes, these fears are well-founded, though they may be overblown.

With proper planning, healthcare costs in retirement are within the means of average and wealthy Americans, provided they are able to afford a Medicare supplement policy. Those who are unable to save for retirement because of illness or low income will go onto Medicaid. Millions of others will qualify for healthcare services and long-term care through the Veterans Administration, benefits that can go a long way to protecting a nest egg.

Though that should provide some comfort to Americans, planning for healthcare related expenses in retirement cannot be ignored. If a stress-free, comfortable retirement is your goal, you need to prepare for healthcare expenses, and it is never too early to start.

Worrying hurts your health

Stress damages health, so from that perspective, stressing out about healthcare costs runs counter to the whole purpose of healthcare. If you prepare ahead of time, there is little reason to worry about healthcare costs in retirement. But you have to understand how the Medicare system works and what you can expect to pay in out-of-pocket costs throughout your retirement. With the right amount for healthcare costs baked into your retirement plan, you can spend your time and energy on an exercise program instead of worrying about money, a habit that will keep you strong and healthy well into your golden years.

Medicare Parts A, B, C, and D

Part A was the original Medicare. It covers hospitalization. There are no monthly premiums, though a $1,340 deductible applies as of 2018. After 60 days of hospitalization, the patient becomes responsible for a $335/day coinsurance. After 90 days, the coinsurance goes to $670/day. After 60 more days, the patient’s coverage runs out.

The optional Part B covers doctor and treatment costs. Premiums vary based on location and other factors but average $134 per month. As of 2018, patients are responsible for a $184 deductible and 20 percent coinsurance. If you can afford a larger premium, you can consider Part C. Run by private companies, the so-called Medicare Advantage plans provide additional coverage options, such as vision, dental, pharmaceutical, and wellness programs. Part D covers prescription drugs.

Most retirees spend more on healthcare than at previous times in their lives

There’s no surprise here. The older we get, the more care we need and the higher the chances we will fall ill or get severely injured. We are also more likely to depend on prescription drugs.

For retirees who have enjoyed a strong suite of employer health benefits and are unprepared for retirement, the out-of-pocket cost difference can cause an uptick in the blood pressure. For retirement planning to be effective, it must budget for more out-of-pocket costs. With a 20-percent Part B coinsurance, many seniors can expect to pay several thousand dollars or more out of pocket each year. If you have long-term conditions requiring extensive care, it is easy to see how Part A and Part B out-of-pocket costs can eat away even a large nest egg.

Medicare Supplement Policies

To protect the assets you worked all your life to accumulate, you will need a Medicare supplemental insurance policy. The cost of this should be included in your retirement budget. Since a long-term hospital stay or chronic illness could send your medical bills into the five or even six figures, you stand to lose some or all of your assets if you do not protect them with a Medicare supplemental policy.

Since how much healthcare a person needs varies so greatly by the individual, estimating the actual out-of-pocket costs for your retirement years is difficult. Budgeting for Medicare supplemental policies can eliminate some of the guesswork. By some estimates, without a supplement, the average senior could face over $200,000 in out-of-pocket costs between age 65 and 90. For this reason, saving for out-of-pocket expenses and a supplement policy is essential. Also, retirement planning should factor in the costs of medical services and devices not covered by Medicare, such as hearing aids or customized orthotics.

Knowledge is power.  Right now, you likely have time to plan ahead for the “what-ifs” in retirement.  We are here to help you navigate the winding road of retirement planning.