In a Wall Street Journal podcast, Gail Marks Jarvis explains why it’s so hard to prepare for your health care costs in retirement. But, there are ways to keep retirement costs down.
At 65, most people have little understanding what their health care needs and costs will be as they age. If you are “typical,” you might be good with putting aside $165,000 to cover your future health care needs. That’s what Fidelity says you’ll need. But, who’s typical?
You might need costly drugs. Or, you might find yourself in a nursing home. Or, you might want a fulltime caregiver after a fall. Your health care costs are unpredictable.
Some experts recommend saving 10 times your annual salary at the time of retirement to cover all future health care needs. But, even that might not be enough. It all depends on what medical conditions you develop, where you live, and what your insurance will cover.
Keep in mind that Medicare does not cover your long-term care needs, such as nursing home care or home care. It also doesn’t cover most vision, hearing and dental care. These costs could add up quickly.
You might need to spend $330,000 out of pocket just for yourself. Couples could spend as much as $660,000 on medical and prescription costs that Medicare does not cover.
Medicare also does not cover the full health care costs for most treatments and physician visits. You pay about 20 percent of those costs. And, even with your Part D prescription drug coverage, you can end up paying a lot in copays for your medications.
You pay a Medicare Part D premium every month, just like you pay a Part B premium every month. But, keep in mind that your Part D drug plan only covers the drugs listed on its formulary. If the drugs you take are not on the formulary, you must pay for them in full. If they are on the formulary, you will pay a copay, up to $2,000 out of pocket. After that, your Part D plan should cover the drugs on its formulary in full.
(Note: If you are enrolled in a Medicare Advantage plan, you likely will not pay a Part D premium. However, should you need costly or complex care, you might find that you can’t see the doctors or use the hospitals of your choice and you also might face inappropriate delays and denials of care. In traditional Medicare, you can see most doctors and use most hospitals anywhere in the US. And, you will not face prior authorization hurdles or frequent inappropriate denials of care.)
How to protect yourself from high out of pocket health care costs? Make sure your doctor takes Medicare if you have traditional Medicare. Most specialists do. And, make sure your doctors are in your Medicare Advantage plan’s network if you are enrolled in a Medicare HMO or PPO. Unfortunately, doctors come and go from Medicare Advantage networks, so there are no guarantees.
While you’re working, put as much as possible into your retirement accounts. For sure, make the most of your employers’ match. And, if you can, wait until you are 70 to enroll in Social Security. People who wait see a 25 percent increase in their benefits.
Here’s more from Just Care:
- $150,000: Your health care costs in retirement
- Traditional Medicare offers better home care benefits than Medicare Advantage
- Medicare Advantage: Beware of inappropriate nursing home stay denials
- Medicare coverage of nursing home care is very limited
- How to maximize Social Security benefits
My health care costs with traditional Medicare, Supplemental and Drug coverage, plus my deductible, copays and the cost of the only prescription drug I take, eat up about half of my income. My income is small, my SS check very small–and I’m a pretty healthy, active 80 year old. The cost of the supplemental premiums is over $3100/yr! Not sustainable.