October 17, 2008
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:
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.treasury.gov/resource-center/faqs/Taxes/Pages/Health-Savings-Accounts.aspx) or www.hsasearch.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:
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.
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