How are you preparing for your health care needs in retirement? It’s one of the biggest expenses, and so is likely to take a large chunk of your retirement budget. Here’s what you need to know.
Medicare leaves a lot of gaps.
Some retirees think they’ll be able to rely on Medicare to cover much of the cost of care as they age, but that’s unfortunately not the case. In fact, there are a number of essential medical services and expenses that Medicare Part A or Part B don’t cover. These include:
- Deductibles and copays
- Prescription drugs
- Long-term care
- Most dental care
- Routine vision care
- Routine hearing exams or hearing aids
What does Medicare cover?
After age 65, Part A (which is hospital insurance) does pay a portion for inpatient hospital stays, surgery, stays in skilled nursing facilities, hospice care, and some home health care. Part B (the medical insurance part) helps pay for visits to your doctor, certain preventive services, outpatient care, and even some medical supplies and equipment.
Beyond Part A & Part B
For more coverage than you would get with Medicare Part A and Part B, you have the option of joining a Medicare Advantage plan. Sometimes referred to as “Part C” or “MA Plans,” these plans are offered by private insurance companies that are Medicare-approved and that must comply with Medicare rules.
The coverage of Medicare Advantage plans vary, but many cover prescription drugs under Part D and may include some cost savings or subsidies toward dental, vision, and hearing care.
Medigap is a Medicare supplement plan that covers some of your out-of-pocket health expenses once traditional Medicare has paid its share. It is separate from Medicare Advantage and, like Part A and Part B, doesn’t cover long-term care, vision care, dental care, prescription drugs, hearing aids, or private duty nursing.
Long-term care may be one of your largest potential expenses.
As hard as it may be to accept, there may come a time in your future when you’re unable to do all the things you do today. According to the U.S. Department of Health and Human Services, someone turning 65 today has a 70% chance of needing some form of long-term care services later in life. While one-third of those who are 65 today may never need long-term care, 20% will need it for more than five years.
If you do need care, the cost of that care will depend on where you live and the level of care you need, but one thing is certain: it will be expensive. The median cost of a private room in a nursing home facility is estimated by one survey to cost more than $109,000 annually. A home health aide is estimated to cost $56,559.
What is long-term care coverage?
It provides coverage for the costs associated with services that help with activities of daily living, such as assistance with bathing, dressing and eating. Sometimes the need for long-term care arises from a medical condition or injury, and sometimes it comes as a result of the normal aging process.
To obtain long-term care benefits, you may want to consider purchasing long-term-care coverage. The younger you are when you purchase long-term care insurance, the lower your cost for premiums (although you will be paying those premiums longer). If you already have a medical condition when you try to buy coverage, you may be ineligible for coverage.
Newer to the insurance market are hybrid options that combine life insurance and long-term care. There are a number of pros and cons to both traditional long-term care insurance and hybrid options, so be sure to do your research and discuss with your wealth advisor how they fit in with your financial plan.
Other ways to pay for long-term care
Purchasing coverage specifically for long-term care isn’t your only route to thriving in necessary daily activities as you age. Some retirees who can opt instead to put aside money for long-term care using self-insurance or even health savings accounts.
In the end, how much of your retirement funds will be needed for health care depends on your health and your longevity, so it can be hard to know how much to save. But even if you can’t see what the future holds, it’s crucial to make a decision earlier than later about how you will pay for your health and medical needs in retirement.
Don’t go it alone: The wealth advisors at Ironwood Wealth Management are here to help you determine the best path forward when it comes to saving and investing for all your retirement needs. Get in touch to learn more about us and our services.
