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Health Care in Retirement

Health Care in Retirement

| July 14, 2016
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Most people understand that health care will be one of, if not the biggest expense in retirement. However, according to a Nationwide study, 4 out of 5 people cannot accurately estimate how much they expect to pay for health care in retirement. Medicare and retiree health insurance benefits might cover some of the costs, but many will pay a significant amount of their health care expenses out of pocket.

Health care is a large expense because it is continually getting more expensive and the likeliness of going into some form of long term care is high. If you are not prepared for these expenses, they can severely limit what you will do for the rest of your retirement, because of the pressure that it will put on your finances.

Lets look at some topics involved with this very expensive part of retirement.


Many people are surprised that when you sign up for Medicare, the cost for the program is not completely covered. There are premiums and cost-sharing that you subject to. In fact, 45% of Medicare related expenses are co-pays, deductibles, and cost sharing expenses.

Signing up for Medicare is one of your first major decisions. You can sign up 3 months before your 65th birthday month and the window remains open until 3 months after your 65th birthday month. You can choose not to enroll at that time, but it is likely your premiums will be higher. Open enrollment is from January to March.

When it comes to choosing a Medicare program, you really only have two paths to go down. One is a mix of private and government insurers (Medicare Part A, B, and D) and the other is only government approved private insurers (Medicare Part C). It is up to you to figure out which option is best for you. Your financial advisor should be able to help with that decision.

Even though Medicare covers a lot of services, there is a gap that exists between needed services and coverage. This is where some people turn to Medicare supplemental insurance. As a general rule, Medicare will cover the individual first, then the supplemental insurance will kick in.

Long-Term Care

Most people don’t seem to want to think about long-term care or don’t even really know what it is. Some think that long-term care is all nursing home costs. Although that is the most expensive part of long-term care it is not the only part. In fact, 51% of long-term care claims come from home health care, 18% from community care, and 31% from nursing homes.

It is likely that either you or your spouse is going to need some sort of long-term care services. According to the American Association for Long-Term Care Insurance (AALTCI), 73% of women who are married are likely to need some sort of long-term care.

You may think that Medicare or other health benefits will cover long-term care. However the reality is, that most of the expense is going to the individual. Medicaid can be a solution. However, you have to have very little assets in order to receive Medicaid. Before you think you can just gift those assets away, there is a look back provision when it comes to Medicaid.

Some people say they will rely on “informal care” or having a family member help them when the situation arises. However, the burden placed on caregivers (usually woman) can cause both a physical and financial burden. According to AALTCI, 38% of woman age 75+ still have a spouse to provide care for them. According to the Minnesota Woman’s Press, there is a greater incidence of depression and heart disease among caregivers. Also lost wages and benefits result in an average loss of $650,000 for woman caregivers.


So with all this information, what is a person to do? There is no way to predict everything that is going to happen to you or your spouse when it comes to health related expenses. The only thing to do is to make a plan for those expenses. Projecting costs out and preparing for them is the best formula. The old saying, “if you fail to plan, you plan to fail”, does seem to apply here. Financial advisors or planners should be able to help with the plan and solutions to solve this very high expense in retirement.

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