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Preparing for Healthcare Costs in Retirement

For many Americans, navigating the maze of health insurance options – from employer-based plans to individual policies – can be dizzying. Much of that changes at 65. That’s when individuals generally are eligible for Medicare, which covers routine healthcare expenses, such as visits to doctors and prescription drugs. But the program doesn’t cover everything.

At Rock House Financial, we help families plan for the future as much as possible. In this effort, below is a breakdown of how Medicare works – and your coverage options for filling in the gaps.

It’s never too soon to start planning for the future. Contact Rock House Financial and get the conversation started.

Inside Medicare

Medicare comprises of four parts that cover different healthcare services and carry various financial obligations. People who are already receiving Social Security benefits before they turn 65 will be automatically enrolled in Medicare Parts A and B. Others can enroll online around their 65th birthday by visiting

Medicare Parts A and B are known as traditional Medicare. Part A covers hospital services, including in-patient stays, care in a skilled nursing facility and hospice care. You can sign up for Part A coverage at no cost as long as you or your spouse have paid Medicare payroll taxes for at least 10 years.

Part B covers doctor’s office visits and other outpatient services. You’ll need to pay a premium for Part B (about $144.60 a month in 2020). You’ll also need to meet an annual deductible ($198 in 2020), after which Part B will cover 80 percent of approved costs.

Parts A and B don’t cover all expenses, such as the cost of prescription drugs. Individuals looking for more comprehensive coverage may want to consider adding Parts C and D to their Medicare plan.

Part D provides prescription drug coverage and is offered by private insurance companies. You will need to pay a premium for Part D coverage (about $42 per month in 2020).

Also known as Medicare Advantage, Part C covers the same benefits as Parts A and B, but through a private health insurance company. Plans vary, but you may also get vision, hearing and dental benefits in addition to prescription drug coverage. You may be able to reduce your monthly premiums if you’re willing to take on a higher share of your health care costs and potentially have access to fewer providers.

At Rock House Financial, we have heard some retirees express concern that Medicare won’t give sufficient coverage for their medical needs; that they might need to purchase a private plan. This is where Medicare supplemental insurance, also known as “Medigap,” comes in and can help fill in other gaps left by the Medicare program. It’s important to discuss all of your options with a Medicare insurance consultant to understand the different parts of this coverage and make sure you get the coverage you need without overpaying.

Medicare Eligibility and Enrollment

The initial Medicare enrollment period is different for everyone. You have a seven-month window to enroll, starting three months before the month in which you turn 65 and ending three months after the month in which you turn 65.

If you don’t sign up during this window, you could face late-enrollment penalties and pay higher premiums. But there are some exceptions: If you are still working when you turn 65, for instance, and you still get healthcare coverage from your employer, you can delay enrolling without facing penalties.

Long-Term Care Insurance

Even if you have all parts of Medicare, you may lack certain healthcare coverage. Namely, Medicare and Medigap policies don’t cover long-term care, including assistance with day-to-day tasks due to chronic illness, disability or old age.

According to the U.S. Department of Health and Human Services, this type of care can be expensive – the average cost of a semi-private room in a nursing home is $6,844 a month. Long-term care insurance can help cover various costs, such as the cost of nurses and therapists you may need to assist you, the cost of nursing homes and assisted-living facilities, and sometimes even the cost of home modifications, such as wheelchair ramps.

How to Buy Long-Term Care Insurance

Long-term care policies cost less when you’re younger and in good health. Waiting until your health is less stable may hinder your ability to find a long-term care policy at all, and you could be turned down due to a preexisting condition.

There are different ways to get long-term coverage through an insurance policy. A long-term care provider can be added to an annuity or life insurance. A traditional long-term care policy will only cover long-term care, and there can be different benefits to cover spouses, inflation, home health care and other needs. Some policies, while they say they offer coverage, may not be adequate when the time comes or have certain qualifiers. It’s important to shop out a policy that works best for you.

Talk with a financial advisor about your options to cover long-term care. At Rock House Financial, we can help you evaluate what type you may need and if a long-term care policy is right for you. For some individuals, making a plan to self-insure or save for a long-term care event may be a better option, especially if they are not eligible for a long-term care policy. Finding a fee-only financial advisor who isn’t paid a commission to sell you a specific type of long-term care policy can help you fairly evaluate your best options. (For more on what this looks like, click here.)

Finding healthcare in retirement can seem like a daunting task, especially if you’ve had access to employer-based healthcare coverage for most of your life. But if you’re mindful of your enrollment period for Medicare and know where to turn for additional coverage, you can find the right policies to meet your healthcare needs in your Golden Years.

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