Medical Costs After Retirement

average health care costs for retirees

It is important to understand that medical costs after retirement will change and unfortunately not for the better. For many Americans the thought of health care costs, much less changes, never crosses their mind until they are hit with the unfortunate reality that medical costs after retirement are EXPENSIVE!

Understanding why medical costs after retirement are expensive is a vital piece of the puzzle in preparing an accurate financial plan for your future. As it stands now, not many people are aware of the role that health care costs in retirement play. Nor are they properly educated on the impact that not accounting for such a costs can have in maintaining financial security in retirement. Since not very many people are aware of the importance medical costs can have in a retirement plan, they therefore do not account for it. In order to be able to account for such an expense it is key to have an accurate estimate for this cost.

Do You Know What Medical Costs After Retirement Will Cost You?

According to a National Survey on “Health Care Costs in Retirement” through Consumer Study 2012, a meager 4 out of 5 Americans were able to accurately estimate their medical costs after retirement. Do you know what your medical costs after retirement will cost you? Probably much more than you think.

By enrolling in Medicare, as well if you are fortunate enough to have employer-provided retirement benefits, you will have the opportunity to save on your medical expenses in retirement. However, neither of these coverage options will cover all of your costs. In fact, for a couple retiring today that plans to spend 20 years in retirement their out-of-pocket costs will average $240,000.

Additionally, changes in recent legislation have resulted in increasing Medicare costs and decreasing Social Security benefits. So, if you are one of the 66 percent of Americans who intend on Social Security being your main source of income in retirement, you could be in trouble.

Medical Costs After Retirement – Risky Business For Your Financial Plan

As you begin your retirement planning process there are likely only two main risks that are on your mind: inflation and market decline. However, upon entering retirement these risks in themselves will magnify and others will arise. It is safe to assume that after retirement other risks such as outliving your savings and medical costs will begin to weigh heavily on your mind – and rightfully so.

Medical costs after retirement are estimated to continue to rise at a steady inflation rate of 5.8 percent through 2020, according to “National Health Spending Predictions Through 2020”- Health Affairs. With an already shockingly high out-of-pocket health care expense estimate for retirees, it is no wonder that medical costs after retirement is such risky business. Especially when not accounted for.

Can I Rely On Medicare To Cover Medical Costs After Retirement?

The answer to this is yes and no. Yes Medicare will cover some of your medical costs after retirement, and no you cannot rely on them to cover them all. In fact, The Employee Benefit Retirement Institute says that Medicare only covers roughly 51 percent of medical expenses after retirement.

It is important to take the time to properly educate yourself on the Medicare plans available, what the potential cost to you is, and what they cover prior to selecting a plan. Here is brief overview of what each plan is about.
– Medicare Part A
Medicare Part A is known as “hospital insurance.” Meaning that it covers inpatient hospital care, along with the occasional nursing home expense and rare hospice coverage.
– Medicare Part B
Medicare Part B is known as “medical insurance.” Meaning that it covers outpatient treatments, doctor’s visits (not including specialists, co-pays and do not forget deductible), as well as some preventative treatments.
– Medicare Part C
Medicare Part C is known as a “medical advantage plan.” It combines the benefits of the Medicare options from Part A, B & C with private provider coverage. Often includes prescription drug coverage as well.
– Medicare Part D
Medicare Part D is known as “prescription drug insurance.” Meaning it covers the prescription drug costs after deductible is met.
You will have the ability to enroll in Medicare beginning the month of your 65th birthday. After which you will have a 7 month grace period to enroll before incurring penalties. If you enroll after grace period you will pay Late Enrollment Penalty, which basically equates to higher premiums, for the remainder of your life. So stay educated on the matter. Know your options, know what coverage is best for you and enroll on time to save money.

What Will Your Medical Costs After Retirement Be?

Do you know what to expect in terms of health care expenses after you retire? Most don’t. A recent study revealed that only 8 percent of Americans who had completed their financial planning for retirement (many with use of trusted financial advisors and counselors) had considered health care costs. Oops.

By the time retirement rolls around there are many old and new risks that stand to threaten your financial security. Will you be prepared to handle the financial glitches they throw your way? Jester Financial Technologies has the tools to ensure that you will. Considering accurate depictions of what to expect in terms of insurance premiums, as well as out-of-pocket expenses, long-term care and health history are all big factors in building a practical financial plan. Use our FREE online calculator for a reliable estimate of what your medical costs after retirement might be and bring yourself one step closer to financial peace-of-mind, today.

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