Wednesday, July 9, 2014
Many Americans do not realize that medical care can consume a large portion of their retirement budget. According to the Employee Benefits Research Institute (EBRI), Medicare currently covers roughly 62 percent of an individual’s medical expenses. Unfortunately, EBRI says the percentage covered is likely to decrease in the future. With healthcare costs on the rise, it is more important now than ever to plan for these expenses in retirement. Here are some steps you should take ahead of time to prepare for medical expenses:
- Understand Medicare. While you do not have to be an expert in Medicare, understand that Medicare is similar to a government-sponsored health insurance plan for seniors. Seniors can choose to be covered by Original Medicare, which is broken into two parts (A and B) or a Medicare Advantage plan (part C). To cover prescription drug gaps, Medicare users can pay for Part D, which is the Medicare Prescription Drug Plan.
- Estimate Future Healthcare Costs. According to a 2011 guide to healthcare and retirement costs, the average annual health care cost for a 65-year-old in poor health and on Medicare was $4,760. For a healthy 65-year-old on Medicare, the average cost was $4,450. By age 75, those numbers increase by about $1,000.
- Look at Your Options. There are many ways to save, earn or otherwise obtain the funds you will need to pay for medical expenses during retirement. Some employers will provide medical coverage after retirement. You should also continue to save and invest as much as possible to help pay for future out-of-pocket medical expenses.
See Scott Holsopple, How to Factor Medical Expenses into Your Retirement Plan, US News, July 8, 2014.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.