If you have been covered by some type of employer-sponsored health plan during most of your working life, you may be in for a rude awakening, as you begin to navigate through your options for health care coverage in retirement. Not only are the available choices numerous and difficult to understand, it can cost much more than ever anticipated.
The process of being accurate in your planning could now be more important that ever. A new study, commissioned by Fidelity Investments indicates that a 65-year-old couple may need more than $250,000 to pay for medical expenses over the remaining course of their lifetime.
It is important to know first what health care coverages you may be eligible for in retirement. Were you or your spouse part of the military? Will you be eligible for coverage under Tri-Care? If your company has had a policy of covering retirees in the past, there is a good chance that that option may not continue. For those companies that elect to continue coverage, many are requiring their participants to carry more of the cost burden.
Then, of course, there is Medicare to consider. Do you know how and when to enroll?
Are you familiar with the enrollment rules? Have you factored in the costs associated with Medicare? Will your income effect what you have to pay for Medicare? These are important issues to understand before you are eligible for Medicare.
Potential situations that could cause a gap in coverage or a possible penalty for an enrollee include:
- If you plan on working to age 66 or older and are covered by an employer’s health insurance.
- If your former employer offers health benefits in retirement.
- If you plan on delaying taking your Social Security benefits to age 66, or older.
- If you have left your job and are on COBRA at the time of Medicare eligibility.
Of course, there are the other options that Medicare offers. Is a Medigap or a Medicare Advantage Plan right for you? Is Part D something that is needed or are you covered elsewhere? What if you missed the initial enrollment period for Parts C or D, how will your options change?
According to the aforementioned Fidelity study, more than half of the respondents said they are paying for health care cost in addition to what Medicare covers. Additionally, almost half of those surveyed have chosen to have supplemental Medicare coverage. One of the many important themes from the study is that most retirees did not fully anticipate the magnitude of the costs of health care in retirement. Many thought that most of it would be taken care of.
Bottom Line
Take time now to do your homework. Check with your financial adviser to discuss Medicare enrollment, including all of the enrollment time periods, options and benefits. In addition, discuss what your anticipated costs will be in the future and plan now on how they will be paid, not when it is time to pay them. For more information, contact Henssler Financial at 770-429-9166 or experts@henssler.com.