Underestimating healthcare costs is one of the central challenges seniors face when planning their retirement budget. It’s easy to track fixed expenses like your mortgage or car payment, but when it comes to healthcare, costs can quickly balloon far beyond what you anticipate. How can a budget-conscious retiree plan effectively for the future?
It’s Easy to Forget About Healthcare Costs
Susan was nearing her 65th birthday and excitedly calculating her retirement income, looking forward to scheduling trips to see her children and grandchildren in distant states. She figured she’d have just enough in her monthly cash flow to sustain her current lifestyle and take a couple of trips ever year. She figured she’d be able to pay the Medicare Part B premium just fine. And that’s all she needed, right?
After learning more about what traditional Medicare covered (and didn’t cover) Susan realized that if she wanted dental and vision care, she would have to expand her monthly budget to cover a Medicare Advantage plan. Since she lives alone, she also wants to pay for long-term care insurance, giving her the peace of mind that her savings will be preserved if she needs around-the-clock care down the road.
It’s easy to forget about healthcare costs when you’re used to your employer paying for the majority of your premium. Not only are newly retired seniors now responsible for those premiums, they also have to pay for all of the out-of-pocket expenses that come up along the way.
Medicare Costs Money
When you’re planning your retirement budget, the first fact you should know is that Medicare will cost money.
There is no premium for Medicare Part A, as long as you’ve worked enough years, but you are still responsible for the annual deductible and any co-payments for hospital stays over 60 days.
Depending on your income, you’ll pay between $134 and $428.60 for Medicare Part B in 2017. You’ll also pay an annual deductible and you will be responsible for some co-payments.
For a Medicare Part D prescription drug plan, seniors paid an average of $34 per month in 2016. You will also have deductibles and co-payments associated with this plan.
Basic Medicare Doesn’t Cover Everything
If you’re like Susan, you too will see the gaps in the coverage offered by traditional Medicare and you will want to review additional insurance options.
A Medigap plan could help pay for some of the deductibles and co-payments that otherwise would come out of pocket under traditional Medicare. Medicare Advantage plans, sometimes referred to as Medicare Part C, are offered by private insurance companies. They offer all of the same benefits as traditional Medicare, but include benefits like prescription drugs, vision and dental.
How to Plan
Here are three ways to effectively work healthcare costs into your retirement budget:
- When you’re comparing plans, list the annual premiums, deductibles and co-payments for each to come up with an estimated annual total. Calculate all of the costs, not just annual premiums, and you’ll end up with a more accurate estimate of each option.
- Talk to your financial advisor to make sure you’re smartly managing your retirement income in a tax-efficient manner. This can help keep Medicare Part B premiums from rising.
- Research all of your healthcare coverage options with an advisor from My Senior Health Plan. We will help you make sure you have the insurance that meets all of your health and budget needs, both for today and for the future.
Call My Senior Health Plan today for a free consultation. We help demystify Medicare and make sure you find the coverage that’s right for you. Click below to get in touch with us to help explore your healthcare options.