Healthcare, Medicare and more

What are your options for healthcare coverage during retirement?

Healthcare is one of the most daunting aspects of retirement planning and is chewing up more and more of retirees’ savings every year. A good way to prepare is to arm yourself with knowledge. The following key facts about Medicare, Medicaid and Medigap coverage will help.

Medicare

Medicare is a national program that was created by the federal government in 1965. As with Social Security, you pay for the program with money withheld from each of your paychecks. You can enroll in the program when you turn 65—even if you aren't ready to apply for your Social Security benefit.

Participation in Medicare is strictly voluntary, and you can choose to decline coverage. Before refusing coverage, however, make sure any health insurance policy you hold doesn’t limit your coverage because you are Medicare-eligible.

» Review details online at medicare.gov

Medicaid

Medicaid is a safety net for people who can’t pay for needed healthcare. Guidelines for eligibility vary by state, but generally, you will qualify if you fit a “need” category such as being disabled or aged—as well as having a financial need determined by the state.

Each state also determines the amount they will reimburse providers and the services they will allow. Generally, these services include hospital stays, doctor visits, home healthcare and nursing home care.

Medigap

Many retirees age 65 and older purchase Medigap insurance due to high potential out-of-pocket costs for Medicare deductibles, co-payments and co-insurance. This supplemental insurance is not offered by the government. It is purchased from private health insurers according to strict federal regulations.

You have a six-month window to purchase Medigap insurance from the day you first enroll in Medicare Part B. This window is important because it allows you to purchase your Medigap coverage from the insurer of your choice even if you have health problems.

What can I expect to spend on healthcare?

A couple who retired at age 65 in 2010 may need $255,000 to cover healthcare expenses in retirement, according to one study by the Employee Benefit Research Institute. Retiring at age 65 in 2020, a couple may need $427,000 to cover the same expenses.^[1]

This study shows that healthcare spending will likely be a significant portion of your retirement budget. These numbers combine single and married households, so you may likely consider:

Spending less if you are single
Spending more if you are in a married household
Significant health problems indicate more as opposed to less healthcare spending

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