By Wire Reports
August 19, 2018
An
average couple entering retirement at age 65 faces expensive future costs of
care. The challenge is particularly stark for women, who face higher lifetime
costs due to longer life expectancies.
When your clients think about how they'll spend their
retirement savings, they probably imagine traveling the world, getting more
involved in their hobbies, or spoiling grandchildren. What they probably don't
envision is spending every spare dime on healthcare expenses.
Unfortunately, that's the ugly reality some retirees face.
The average 65-year-old couple retiring today can expect
to spend roughly $280,000 on healthcare during retirement, according to a
recent report from Fidelity Investments. That includes costs like premiums,
deductibles, and other out-of-pocket expenses.
This may come as a shock to some, as many people
mistakenly believe that Medicare will cover all their healthcare expenses
during retirement. The truth is that while Medicare can offer significant
financial assistance, it doesn't cover everything. And some of the costs it
doesn't cover can put a serious crack in your nest egg.
What Medicare does (and doesn't) cover
First, it's important to understand what Medicare does
cover and how much you're paying for it. Original Medicare consists of Part A
and Part B. Part A covers hospital visits, visits to skilled-nursing
facilities, and in-home healthcare services.
As long as you've been working and paying taxes for at
least 10 years, you generally don't need to pay a premium for Part A coverage.
You do have a deductible for each benefit period, though, and for 2018, that
deductible is $1,340. Also, if you have to spend an extended period of time in
a hospital or skilled-nursing facility (typically longer than 60 days for
hospital stays and 20 days for visits to a skilled-nursing facility), you may
have to make coinsurance payments, which range from $167 to $670 per day -- or Medicare
may not cover your stay at all.
Part B covers more routine care, like doctor visits and
flu shots, and the amount each person pays varies based on their income. Those
earning less than $85,000 per year (or $170,000 for married couples filing
jointly) pay $134 per month for Part B premiums. You also have to pay a yearly
deductible, which for 2018 is $183. After you meet that deductible, you pay 20%
of the remaining expenses.
You also have the option of enrolling in Part D, which
covers prescription drugs. This coverage is provided by private insurance
companies, though, so the amount you pay will vary widely depending on which
plan you have.
Even considering all that Medicare Part A and Part B
cover, there's a variety of expenses that basic Medicare won't touch. For
example, you still need to pay for all copayments, deductibles, and coinsurance
out of pocket, and those costs can add up quickly. You're also not even
eligible to enroll in Medicare until you turn 65, so if you retire before that
and lose your health insurance when you leave your job, you'll need to find
coverage outside of Medicare.
Then there are healthcare expenses that most people don't
realize aren't covered. Most dental care, for example, isn't covered by
Medicare, and neither are eye exams, hearing aids and exams, dentures, or
long-term care.
These aren't necessarily hard rules, because there are
always exceptions. Expenses that are considered medically necessary are often
covered by Medicare, while routine care is not. So if, for example, you have a
dental emergency, then Medicare may pick up the tab, but if you simply get your
teeth cleaned or have a cavity filled, then you'll likely need to pay for that
out of pocket. And even routine care can cost hundreds of dollars per visit. If
you're not prepared for those expenses, they can drain your savings quickly.
Don't let healthcare costs catch you off guard
The best way to avoid paying tens (or hundreds) of
thousands of dollars in healthcare costs is to do your research, understand
what Medicare does and doesn't cover, and figure out how to pay for uncovered
medical care before you retire.
One option is to enroll in a Medicare Advantage Plan (also
known as Medicare Part C). A Medicare Advantage Plan is a health plan offered
through private insurance companies that includes all the benefits of Medicare
Part A and Part B, as well as some additional coverage for vision, hearing, and
dental. Advantage Plans are similar to the insurance plans you likely enrolled
in while you were working: You have to visit a doctor within your plan's
network or risk not being covered, and the premiums and deductibles vary by
plan and provider.
Although prices vary, you typically get more coverage with
an Advantage Plan. Depending on the type of care you need, it could be worth it
to pay more for an Advantage Plan in order to pay much less out of pocket for
routine care.
Another option is to use a health savings account (HSA) to
cover some of your medical expenses. An HSA is essentially a retirement savings
account just for healthcare costs. You're eligible for an HSA if you have a
high-deductible health insurance plan, and for 2018, that means you have a
deductible of $1,350 for an individual or $2,700 for a family, as well as
maximum out-of-pocket costs of $6,650 or $13,300 for an individual or family,
respectively.
If you're eligible to open an HSA, you can contribute up
to $3,450 per year (or $6,850 for family health plans) in pre-tax dollars.
Those aged 50 and over can contribute an extra $1,000 per year. When you
withdraw the funds, so long as you spend them on qualified medical expenses,
you don't need to pay taxes on withdrawals either.
Regardless of which route you choose, it's crucial to have
a plan in place. If you go into retirement assuming you won't need to pay a
dime more in medical expenses than you used to, you'll be in for a rude
awakening. But if you prepare yourself and come up with a plan before you make
the leap into retirement, your wallet will thank you.
The Motley Fool has
a disclosure policy.
___
(c)2018 The
Pantagraph (Bloomington, Ill.)
Visit The
Pantagraph (Bloomington, Ill.) at www.pantagraph.com
Distributed by
Tribune Content Agency, LLC.
https://insurancenewsnet.com/oarticle/how-to-prepare-for-costs-medicare-wont-cover
No comments:
Post a Comment