For your working life, healthcare costs are largely covered by your employer. But when it comes time for retirement, healthcare suddenly becomes your responsibility, an important variable that’s often overlooked in the course of retirement planning. Medicare, which covers Americans age 65 and above, can help bridge this crucial healthcare gap for retirees.
It’s not enough to simply count on Medicare. Your health is your most important asset — and it’s essential to craft a Medicare coverage structure that fits into your retirement plan and helps you maintain your goals.
Original Medicare isn’t a comprehensive solution
One common misconception about Medicare is that it covers all your health expenses. The reality is different.
Original Medicare is made up of two different elements:
- Part A: This covers inpatient care and typically has no premiums.
- Part B: This covers outpatient care, and premiums are calculated according to an income-based scale. (Monthly premiums start at $185 per month for those with income under $106,000; they increase all the way up to $628 a month for those with income exceeding $500,000.)
Inpatient and outpatient care is far from exhaustive coverage. Retirees may have numerous other costs, including dental coverage, prescription drugs, and long-term care. In addition, Medicare Part A and B doesn’t provide an out-of-pocket maximum, which can jeopardize retirement savings.
That’s why your retirement plan needs to account for coverage that goes beyond traditional Part A and Part B coverage.
Three additional coverage options: Medigap, Part D, and Medicare Advantage
There are three main supplements to standard Medicare coverage:
- Medicare Advantage: Also known as Part C, this kind of plan includes the inpatient and outpatient care of Part A and B, along with prescription drug coverage. (This coverage includes out of pocket maximums.)
- Medigap: This private insurance supplement to Part A and B coverage helps cover out-of-pocket costs including co-pays, coinsurance, and deductibles. These policies don’t cover prescription drug costs, nor do they have an out of pocket maximum.
- Medicare Part D: This private insurance option provides coverage for prescription drugs.
It’s important to note that these coverages can be combined. Many retirees opt to either purchase Medicare Advantage coverage, or combine Medigap with Part D coverage.
The long-term care variable
You may have noticed what isn’t mentioned in any of the coverages listed above: long-term care. That’s an important gap, when you consider that Americans turning 65 have a70 percent of needing long-term care at some point in their lives.
With the annual cost of an in-home health aidexceeding $75,000, long-term care coverage offers an essential layer of financial security for retirees. Medicare can offer a baseline level of coverage during retirement, but it’s not an all-encompassing solution.
Finding the right Medicare coverage mix for your unique circumstances
Medicare coverage isn’t as simple as it sounds. Deciding what coverage is right for you requires real thought and consideration.
At Price Financial Management, we help you consider the pros and cons of each type of health coverage and can ensure your healthcare needs are properly integrated into your retirement plan. We understand your retirement should be a time of well-earned relaxation and peace. With the proper strategic approach to Medicare, you can rest assured that your health needs will be taken care of — giving you the peace of mind to enjoy your retirement.
Start the conversation with us today about how to integrate Medicare into your retirement planning.