Medicare and Retirement: How to Plan for Your Healthcare Costs in Pennsylvania and New Jersey

Healthcare costs in retirement can be a major expense, especially for those with chronic health conditions. Medicare can help to cover some of these costs, but it's important to understand what Medicare does and does not cover, as well as how to plan for out-of-pocket expenses.

Medicare Basics

Medicare is a federal health insurance program for people aged 65 and over, as well as certain people with disabilities. Medicare has four parts:

• Part A: Hospital insurance

• Part B: Medical insurance

• Part C: Medicare Advantage plans

• Part D: Prescription drug coverage

Part A covers inpatient hospital care, skilled nursing facility care, and some home healthcare services. Part B covers doctor's visits, outpatient services, and some preventive care. Medicare Advantage plans are private health insurance plans that offer Medicare benefits plus additional benefits, such as dental and vision coverage. Part D covers prescription drugs.

Medicare Coverage Gaps

Medicare doesn't cover all healthcare costs. There are copays, deductibles, and coinsurance amounts that you'll need to pay out of pocket. Medicare also doesn't cover long-term care, such as a stay in a nursing home.

Planning for Out-of-Pocket Expenses

According to Fidelity Investments, the average 65-year-old couple who retired in 2021 could spend between $156,208 and $1 million on their lifetime retirement healthcare costs. This means that it's important to start planning for your retirement healthcare costs early. (Source: https://www.fidelity.com/learning-center/personal-finance/retirement/healthcare-in-retirement)

Here are a few tips for planning for your retirement healthcare costs:

1. Estimate your healthcare costs. There are a number of online calculators that can help you estimate your future healthcare costs. Once you have an estimate, you can start to budget for these costs.

2. Save for healthcare costs. One of the best ways to plan for your retirement healthcare costs is to start saving early. You can save in a variety of ways, such as in a health savings account (HSA), a flexible spending account (FSA), or a retirement savings account.

3. Consider supplemental insurance. Medicare doesn't cover all healthcare costs, so you may want to consider purchasing supplemental insurance, such as a Medigap plan or a Medicare Advantage plan. Supplemental insurance can help to cover some of the out-of-pocket costs associated with Medicare.

4. Work with a financial advisor. A financial advisor can help you to create a retirement plan that takes into account your healthcare costs. They can also help you to choose the right supplemental insurance plans for your needs.

Additional tips:

• Postpone retirement if possible. The longer you work, the more time you have to save for healthcare costs.

• Stay healthy. Taking care of your health can help to reduce your medical expenses in retirement. Eat a healthy diet, exercise regularly, and get regular checkups.

• Consider downsizing your home. A smaller home can be easier to maintain and can save you money on property taxes and other expenses.

• Take advantage of government programs. There are a number of government programs that can help to offset the cost of healthcare for seniors. For example, the Medicare Savings Programs can help low-income Medicare beneficiaries pay for their premiums, deductibles, and copays.

By following these tips, you can help to ensure that you have the financial resources you need to pay for healthcare costs in retirement.

Planning for your retirement healthcare costs is important for ensuring that you have the financial resources you need to stay healthy and active in retirement. By following the tips above, you can start to plan for your retirement healthcare costs today.

If you have any questions about Medicare or how to plan for your retirement healthcare costs, please contact a financial advisor. They can help you to create a plan that meets your individual needs.

If you are concerned about planning for your retirement healthcare costs, Medicare & Money is a great resource to get started. A financial advisor can help you to create a retirement plan that takes into account your individual needs and goals.