Among the items weighing heavily on a soon-to-be retiree’s mind is health care, and with good reason if you consider the statistics:
- People age over 60 are expected to spend more on health and medical costs than on recreation and housing combined (Credit Suisse, Longer Lives July 2011)
- On average $491,039 is spent by the average 65 year old for health care during a 20 year retirement (Jester Financial; retirement health care cost calculator)
- From 2012-2022 healthcare rates are expected to increasing an average of 5.8% per year. (Centers for Medicare and Medicaid Services)
So where do you start? Medicare is the first step and this handy chart will show the basics of this government program provided to all of us at age 65.
Medicare Enrollment Information
- About 3 months before your Medicare coverage starts, you’ll get an Initial Enrollment Questionnaire (IEQ) in the mail. It asks about other health insurance you have that might pay before Medicare does. Fill out the IEQ so your bills are paid correctly and on time. You can also complete the IEQ online at MyMedicare.gov
- You can sign up during your 7-month initial enrollment period
- 3 months before the month you turn 65, includes the month you turn 65, and ends 3 months after the month you turn 65
- If you miss your initial enrollment period you may sign up between January 1 and March 31 of each year. Your coverage will start July 1. You may have to pay a higher premium for late enrollment.
- Apply online at SocialSecurity.gov, visit your local Social Security office, or call Social Security at 1-800-772-1213
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It’s very important to sign up during your initial eligibility period. Not doing so will subject you to penalties that will cut into your all-important retirement budget. And speaking of your budget, remember things like co-pays, deductibles, pharmaceuticals, eyewear, hearing aids, etc. add to health care expenses.
Be sure to shop for Medicare coverage each year. As time goes on your needs will change and it pays to make sure you still have the right plan.
How can your advisor help? First by including healthcare and long term care as part of your regular review. Secondly, by working with you and your tax professional to be sure everything possible is being done to keep you out of a higher Medicare premium bracket. And finally, an advisor can point you in the direction of a professional who is experienced both with the Medicare program itself and the coverages available to fill in the gaps. The health care exchanges provided for in the Affordable Care Act do not have to be intimidating and one of these professionals will help you get the most for your money.
A final caveat: Long term care costs are not covered by Medicare and can quickly erode a family’s nest egg. Estimates have put the annual cost of a private room in a nursing home as high as $80,000 – $90,000 per year, and a full time in-home health aide as high as $70,000 per year. The decision on how to cover long term care costs is a personal one that should be discussed with your loved ones and your advisor so that they are aware of your wishes.
-Cheryl Sternasty, CFP®