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Do you have a few hundred thousand dollars saved up to pay for healthcare costs in retirement?
According to a recent study by Jackson National, nearly two thirds of pre-retired investors surveyed underestimated prospective healthcare expenses in retirement. This may seem daunting but today, we want to discuss 5 Critical Pillars of Medicare and Long Term Care planning to help prepare you for what could be one of the most expensive parts of your retirement.
The first Critical Pillar that we want to demystify for you today is what the different parts of Medicare are and how they might apply to you.
For those of you who are not aware, Medicare consists of 4 parts:
Part A which is Hospital insurance that covers inpatient care in hospitals, care in skilled nursing facilities, care in hospice, and home health care.
Part B which is Medical Insurance that covers services from doctors and healthcare providers, outpatient care, durable medical equipment, and preventative services like wellness visits and shots or vaccines.
Part C, also known as Medicare Advantage, is an alternative to Parts A and B that bundles several types of coverage. This could include vision, hearing, and dental insurance.
And Part D which is Drug Coverage which is drug coverage and can help cover the cost of prescription drugs.
Now that we have a basic overview of the different parts of Medicare, let’s talk about the 2nd critical pillar: How to get signed up for it.
Typically, one’s initial enrollment period includes the 3 months prior to turning 65 years old, the month in which you turn 65 years old, and the 3 months after you turn 65 years old.
With that said, if you are receiving Social Security due to disability or retirement, you will automatically be signed up for Part A and Part B when you first become eligible.
If you do not fall into this category, you will need to apply to complete your enrollment.
Once enrolled in Part A and Part B you can explore the additional pieces of the Medicare Puzzle which include Parts C and D.
The 3rd Critical Pillar of Medicare and Long-Term Care Planning is to understand your options if you are still working past the age of 65.
Regardless of if you’re still working or not, you will have the 7-month Initial Enrollment Period we spoke about earlier.
Now, depending on your employer’s coverage, you might be able to delay your enrollment without facing penalties.
In order to figure this out, speak with your benefits manager in the workplace to gain a better understanding of whether your current coverage is creditable or not.
This means that the coverage you have through your employer is at least as good as coverage through Medicare.
If so, this could be an instance where you may not face penalties for late enrollment and when the time comes, you could enroll during a special enrollment period.
In order to qualify, you would need to enroll within eight months of either losing your or your spouse’s coverage through the workplace or stopping work all together- whichever comes first.
The 4th Critical Pillar of Medicare and Long-Term Care Planning is understanding the cost.
Although is many cases, there is no premium for Medicare Part A, there could be deductibles for hospital visits and copays for inpatient stays.
To understand who qualifies for no premium for Medicare Part A, this would typically include someone who paid Medicare taxes while working for a certain amount of time- generally speaking that length of work being 10 years.
With Medicare Part B, there is a premium associated with coverage which can increase depending on one’s income each year.
In addition, there is a deductible in Part B and there could be extra costs for services.
For Medicare Part D, your drug coverage, there is a monthly premium associated and if you choose the route of a Medicare advantage plan there are typically monthly premiums for this as well.
The 5th Critical Pillar of healthcare in retirement is planning for potential costs earlier than you think.
Along with our advancement as a society and innovations continuing to accelerate, we’ve seen our average life expectancy as humans continue to grow over time.
And with that growth comes the need for long-term care, among other things.
Although there is a wide range of types of care from in home care to nursing homes, we’ve seen in many instances that these types of care can range from thousands to tens of thousands of dollars per month on the high end.
Proactive steps such as saving in a Health Savings Account, purchasing long term care insurance, or even working with an attorney for Medicaid planning are all strategies to consider.
The Final Word:
Everyone’s situation is different but we always suggest to our clients that planning early and regularly reviewing your financial plan can help bring you confidence in retirement. As always, if you’d like to talk about your individual situation, please do not hesitate to reach out. Thanks for reading!
Disclaimer:
Rockline Wealth Management (RWM) is a registered investment adviser located in Islip Terrace, NY. RWM is registered with the U.S. Securities and Exchange Commission. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission.
Rockline Wealth Management does not offer tax or legal services. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
Rockline Wealth Management is not associated with Medicare or any governmental organization. All information presented is believed to be factual at the date of publication.
All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's investment portfolio.
Asset allocation and diversification do not ensure or guarantee better performance and cannot eliminate the risk of investment losses. The opinions expressed and material provided are for general information, and should not be considered a solicitation of financial advice or for the purchase or sale of any security.
Real-life and fictional examples given in this video should not be viewed as guaranteed outcomes when investing. Past performance is not indicative of future results and every individual’s investment circumstances are different. Individuals should consult their financial professional before implementing their investment plan.