Retirement Life: How Much Do I Need for Medical Expenses with Medicare?

Fran Majidi
April 5, 2019

There are those of us who think we’re doomed when we retire. We’ve heard Medicare is broken and may not even exist by the time we retire. We hear plenty of nightmarish stories from older people who have to pay out-of-pocket expenses despite their Medicare coverage. On the flip side, some of us are hopeful and actually look forward to a time when we don’t have to worry any longer about healthcare coverage. Having no health insurance and being fined for being unfortunate will be a thing of the past.

A realistic view of Medicare and the amount you’ll have to spend on out-of-pocket healthcare costs fall somewhere in between these two extremes. We probably won’t be strapped but we will not be 100% taken care of.

According to USA Today, a 65-year-old retiring in 2019 will spend about $135,000 to $150,000 in out-of-pocket medical costs during their retirement. This astronomical figure has gone up about $2500 since last year. Of course, these costs would be higher if you have an existing condition or if you live longer than the average American.

If you’re only now thinking ahead to retirement but are years away from these sorts of dilemmas, it’s a good time to prepare yourself better. For instance, there are options to put away money towards medical expenses in flexible spending arrangements (FSAs) or Health Savings Account (HSA). Doing this may be the best investment you’ve ever made. The deductions for these plans are taken out of your paycheck pre-tax so you save on otherwise taxable income. If your boss doesn’t offer an FSA or HSA account, you’ll need a trustworthy insurance to make some of these decisions, or possibly even contributing more aggressively to your 401K or traditional IRA and Roth IRA. We can help pair you up with the right agent, if you visit here. Also, there are Medicare supplemental health care plans that may alleviate you of some of the stresses of out-of-pocket medical expenses.

Does Medicare Supplement (Medigap) Insurance Help Pay for Out-of-Pocket Expenses?

Yes, a Medicare supplement plan can help with deductibles, coinsurance and copayments, which Medicare patients are still responsible to pay. These Medigap plans are private insurance plans and are built to supplement Medicare but are not actually linked to it in any formal way, so keep that in mind if you have issues (Don’t call Medicare to settle disputes with Medigap.).

Keep in mind that when you buy Medigap A or Medicap B from one company, it’s the same package as with another company, except for the price. Regulations have made it so that each type is standardized across the industry so it’s important to shop around and to pay a fair price for coverage.

Can I Buy Medigap if I Don’t Have Medicare?

No, you must be enrolled in Medicare Part A and Part B.

How Do I Buy Medigap?

You can enroll during the Medigap Open Enrollment Period, which begins on the first day of the month that you turn 65 and lasts 6 weeks. Some states allow you to enroll before age 65. You are guaranteed the ability to join any supplement insurance plan for this duration of time. By law, they are not allowed to turn you down, not even for pre-existing conditions. However, you may have a hard time if you miss this Medigap Open Enrollment Period. To help you get the right coverage, we can pair you with a knowledgeable health insurance agent if you visit here.

What if I’m Ready to Retire and Didn’t Save Enough?

You’ll want to learn the ins and outs of your Medicare Part A and Part B. See what these options don’t cover and try to estimate what the costs will be if you pay for them upfront. Then take that figure and round it up by a few thousand dollars for a cushion. This should be a pretty good indicator of your needs.

If you’re not ready to retire financially, the best thing to do is to delay your retirement age, which will boost your Social Security account while giving you time to grow your tax-advantaged accounts like 401K, Roth/Roth IRA, FSA and HSA accounts. To learn more about how to financially plan for retirement, we suggest you speak with a knowledgeable and trustworthy life insurance agent.

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