Planning for health care costs in retirement
Many people think that paying for health care costs in retirement is simply a matter of signing up for Medicare. However, Medicare only covers about 1/2 of these costs, on average. It is important to plan for all of these expenses to ensure a sound retirement.
Let's start by looking at Medicare itself, which consists of the following:
| Part A Hospital Insurance | No premium, but has deductibles. A 90 day hospital stay could cost over $10,000. |
| Part B Medical Insurance | Pays for non-hospital costs like Doctors services. Vision & dental not included. Monthly premiums range from $121 - $390 depending on income. Annual deductibles and 20% coinsurance also apply. |
| Part C Medicare Advantage | A type of Medicare plan offered by private companies that cover Part A and Part B benefits. |
| Part D Prescription Drug | Monthly premium which averages about $41. Has deductibles and coverage gaps which could result in maximum annual out-of-pocket costs of about $5,000. |
Assuming you choose not to enroll in a Part C Medicare Advantage Plan, your annual medical costs could look like this (average case):
A "Medigap plan " is supplemental insurance purchased to cover all those charges not fully covered by Parts A, B and C (as noted in first table).
How about vision and dental? Assuming a moderate annual cost of $1,000 per person for these, you now have total annual retirement health care costs of over $5,000 per person.
Keep in mind that this does not include any long term health care costs! In 2016 it costs well over $200 per day for a room in a nursing home.
Bottom line: don't forget to include ALL health care costs in your retirement planning.