The good news for retirees is that your retirement will last considerably longer than that of your parents or grandparents. Conversely; this is also bad news with the reality of the current cost of medical care for seniors. Currently, inflation for medical care out paces the Consumer Price Index. Another way of looking at this, your medical expenses are increasing at a faster rate than the growing cost of filling up your car’s gasoline tank. In addition, retiring consumers are budgeting on average about $5,620 per year for health care when the real cost is actually closer to $10,750 per year. The average household income for seniors is $40,000 per year! This means that healthcare for the average senior is nearly 25% of their annual income and makes it the second largest expense for retirees. Want another scary statistic? Thirty to forty percent of seniors who reach the age of 65 will end up in Nursing Home care.
Those statistics are important because planning for your medical retirement is extremely important and should be a big part of your discussion with your spouse, your family and your financial planner. Below is a list of things to ponder when you are making these decisions.
- Medicare does not start until age 65. If you are going to retire early you need a retirement plan that includes medical insurance to bridge the gap between retirement and age 65. Consider the following:
Critical tools available to you include HIPPA provision allowing you to retain your employer’s coverage for up to 63 days.
COBRA allows you to continue with your employer’s insurance for up to 18 months (in the case of death or divorce this can be extended up to 36 months) at a rate not to exceed 102% of the employer’s cost.
You may also be able to use your savings from your HSA (health savings plan); your 401K or perhaps even an annuity to cover your health insurance costs until you are eligible for Medicare.
- Medicare options include the following:
Part A: this is the “original” Medicare for hospital insurance. You have three months prior to turning 65, the month you turn 65 and three months after you turn 65 to enroll (a seven month period). If you miss this enrollment period, you will have to wait until the next “open enrollment” for Medicare which is January to March of each year.
Part B: this includes coverage for medically necessary services such as medical equipment, flu shots etc., by the way, it does not include hearing aids.
Part C: in an HMO equivalent and covers elements of Part A, B and D. A lot of seniors “like” this program and it is good coverage unless you plan on traveling during retirement. Part C will not provide adequate coverage if you need medical care outside the area covered by your Part C/HMO.
Part D: This is your prescription drug coverage
Medicare Supplement: supplemental programs are designed to provide you with reimbursements for deductibles and co-payments. You must enroll in this within 6 months of turning 65. Enrollment cost and coverage for the supplements is relatively universal. What you are paying for, in addition to the basic coverage, is the strength of your carrier (will they be in business and be able to maintain the level of coverage they committed to covering during your lifetime) and the level of “real” service. The information in this blog is not meant to be comprehensive and arm you with all the information you need to plan for Medicare. The intent is to create awareness that a significant portion of your retirement planning MUST include plans for medical care. (Check out the Medicare website for more comprehensive information about enrollment and the provisions of Plans A, B, C and D at http://medicare.gov/ )