Health insurance vital in retirementBy Jason Alderman
If you've already retired or plan to in the near future, it's a good idea to review your health care coverage to make sure it has kept pace with your changing needs. Adequate health insurance is a vital component of overall financial security, especially as we age and require more medical care.
Here are a few important considerations:
Most Americans become eligible for Medicare at age 65. Medicare offers numerous plans and coverage options:
- Part A primarily covers hospitalization and has no monthly premium
- Part B pays for doctor's bills and other medical services, is optional and has a monthly premium
- Part C allows people to enroll in private HMO or PPO Medicare plans (generally with additional benefits; and sometimes at additional cost)
- Part D covers prescription drugs, is optional and carries a monthly premium
Note that there may be penalties if you don't sign up for Parts B and D as soon as you're eligible. To learn more about your Medicare options, visit the official site, www.medicare.gov, or AARP's comprehensive overview at www.aarp.org/medicare.
If you retire before age 65, you'll need coverage to bridge the gap through an individual policy, your spouse's plan or another group policy. Some retirees are insured through former employers – although such plans are increasingly rare and often become more expensive over time. An insurance broker can help you compare plans; to find one, visit the National Association of Health Underwriters' website (www.nahu.org).
To lower costs, consider purchasing a high-deductible plan. Monthly premiums are often hundreds of dollars cheaper than comparable low-deductible plans and you're covered for catastrophic illnesses that could otherwise wipe out your savings.
Some people combine a high-deductible plan with a Health Savings Account (HSA) for additional savings. HSAs let you save pretax dollars in an interest-earning account and then withdraw the money, tax-free, to pay for health care expenses. Contributions are tax-deductible, even if you don't itemize deductions, and unspent balances can be carried forward, year after year. For details on HSAs, visit the Department of the Treasury's website (www.treas.gov/offices/public-affairs/hsa) or www.hsafinder.com.
Also consider buying long-term care insurance (LTCI), which covers medical and non-medical services for chronically ill or disabled people who cannot care for themselves, including performing normal tasks like bathing, dressing and taking medications.
Long-term care is expensive. Although Medicare pays for 20 days of skilled nursing care immediately after hospitalization (plus a small portion of the subsequent 80 days), many people require significantly longer care. Another government program, Medicaid, covers custodial care for low-income, elderly and disabled people, but only at approved nursing homes willing to accept Medicaid – and only after you've exhausted most of your assets. See www.cms.hhs.gov for details.
A few LTCI tips:
- Look for policies that pay the same daily rate no matter where care is given.
- Purchase an inflation rider.
- A portion of LTCI premiums is usually tax-deductible.
- Rates are lower and eligibility easier the younger you are. Unfortunately, many pre-existing conditions and serious diseases are disqualifiers, so investigate while still healthy.
AARP's website features a comprehensive overview of long-term care and other age-related health issues (www.aarp.org/families), as does Visa Inc.&339;s free personal financial management site, Practical Money Skills for Life (www.practicalmoneyskills.com/retirement). As always, consult a financial professional regarding your particular situation.
Health insurance is one expense you can't afford to skimp on in retirement, especially as medical costs continue to escalate.
Jason Alderman directs Visa's financial education programs. Sign up for his free monthly e-Newsletter at www.practicalmoneyskills.com/newsletter.
This article is intended to provide general information and should not be considered tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how tax laws apply to your situation and about your individual financial situation.<< Back to Practical Money Matters
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