A Tough Pill to Swallow

The biggest risk to a carefully planned retirement is healthcare expenses. For an average 65-year-old couple, retiring in 2019, healthcare expenses are anticipated to cost $285,000 in today’s dollars over the course of retirement (Source: Fidelity Benefits Consulting estimate; 2019). And we emphasize that this excludes long-term care expenses.

Medicare and what it does and doesn’t cover is confusing, which may lead to underestimating how much money you need for healthcare expenses. Medicare won’t cover all of your healthcare expenses. Here’s what Medicare Parts A and B will cover: most hospital stays, emergency room visits, certain lab tests, and doctor’s office visits. However, you may be responsible for copays and a portion of the costs for these expenses. Medicare Parts A and B won’t cover most dental, hearing, vision, long term care services, and your monthly prescriptions (unless administered in a hospital setting).

Therefore, you may need to purchase a prescription drug plan. Medicare Part D and some Medicare Advantage plans offer prescription drug coverage, which will help you lower your out-of-pocket expenses. You can check to see which Part D plans will cover your medication to select the best plan for you. We suggest you review your Part D plan annually, as the covered medications may change year to year.

You can purchase a supplemental plan through private insurance companies (also referred to as Medigap) to help defray your out-of-pocket expenses from what Parts A and B do not cover. However, you have to pay monthly premiums for these plans, in addition to the monthly premiums for Medicare Parts B and D. The supplemental plans only cover one person, so if you’re married each spouse will have to buy their own plan.

Before Amazon, Instacart, and Grubhub, if you didn’t leave your house, you weren’t spending money. Unfortunately, as we age, it may be more costly to stay at home, especially if you need help with cooking, cleaning, dressing, bathing, and transportation. In-home care expenses can add up (usually $20-25/hour); the average annual cost for home health aides is $50,336. (Source: Genworth Cost of Care Survey 2018) Health aides aren’t the only expenses. You may need to renovate your home to make it more accessible and safer, rent or buy a wheelchair-friendly van, or outsource home maintenance tasks.

Preparing for a comfortable retirement takes knowledge. You will face a number of big decisions: when to retire, when to take Social Security, how to pay for your expenses in retirement, etc. Each decision is interconnected and can affect your ideal lifestyle in retirement. Don’t let unanticipated healthcare costs in retirement be a tough pill to swallow. Turn to a trusted advisor to help you plan for a healthy retirement.

Life is a journey. Navigate it wisely.❍

Robert Fezza, CFP® and Steve Siders, CFP® own Odyssey Personal Financial Advisors, 500 Sun Valley Drive, Suite A-6, Roswell, GA. Their firm specializes in working with people who are serious about making progress towards their financial goals. Odyssey manages portfolios greater than $250,000. Call 770-992-4444 or visit Odyssey Personal Financial Advisors. Securities offered through Cetera Financial Specialists LLC, member FINRA/SIPC. Advisory services offered through Cetera Investment Advisers LLC. Cetera entities are under separate ownership from any other named entity. The views expressed are for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security which may be referenced herein. This information is not a substitute for professional guidance in financial, tax, estate planning or legal matters.