HOW much will my medical coverage cost in retirement?

​A common misconception is that once you retire and go on Medicare, your health care will be free. Unfortunately, this is not true!

Health care expenses are one of the largest expenses for retirees and tend to increase as we age. According to Fidelity Retiree Health Care Cost Estimate, an average 65-year-old couple retiring in 2018 will need approximately $280,000 to cover health care and medical expenses during retirement. Please note that this depends on when and where you retire, how healthy you are, and how long you live.

​What is the best way to reduce health care expenses in retirement? First, eat healthy and exercise regularly. Second, save during your working years. Third, plan for it! A good way to plan for your health care expenses is to review your current health insurance during open enrollment. Open enrollment is the period from 10/15/2018-12/7/2018. During open enrollment, you can make changes to your Medicare coverage.

Here’s a brief overview of Medicare:
 
• Eligibility: You are eligible to sign up for Medicare if you are age 65 or older, or under age 65 with certain disabilities. Sign up at age 65 if you’re not covered by an employer plan; there are penalties for those who sign up late.
• Choices:

1. Original Medicare includes Medicare Part A (hospital insurance) plus Medicare Part B (medical insurance). The government pays 80% while you pay 20% with no limit on out-of-pocket expenses. You can add Medicare Part D (prescription drug coverage). You can also add Medicare Supplemental (Medigap) coverage. A Medicare Supplemental plan covers the gaps left by Original Medicare.
2. Medicare Advantage (Medicare Part C) combines Part A, Part B and usually Part D. Medicare Advantage covers all the benefits in Part A and B plus more. Medicare Advantage limits out-of-pocket expenses with low or no premiums, but you must stay in a network of providers.

• Premiums vary: Most people don’t pay a premium for Part A if you paid Medicare taxes while    working. Part B and Part D premiums are based on income while Part C premiums vary depending on specific plan and income.
• Changes for 2019: The “donut hole” (coverage gap) will close for brand-name dugs in 2019 and for generic drugs in 2020.
 
Yes, Medicare is complicated! There are many resources available to find out more information about Medicare. Medicare & You is an annual handbook published by the U.S. Department of Health and Human Services. Robin G. Smith, a licensed insurance advisor and Medicare expert, recommends going on Medicare’s website (www.medicare.gov/find-a-plan) to view local health care plans, costs and drug coverage.
 
Benefits and premiums change from year to year. After spending time reviewing Medicare’s handbook and website, I strongly recommend that you take a list of your doctors and current medications and meet with a counselor during open enrollment. This can be a representative from the State Health Insurance Assistance Program (SHIP) or an independent insurance advisor. Make an informed decision about your Medicare coverage for 2019.
 
Beth Carroll is a CPA and a daily money manager. Her company, Cornerstone Money Management, LLC, helps seniors in their homes with billpay, financial organization and cash flow management. You may reach her at beth@cornerstonemoneymgmt.com or 401-323-4895.
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