3 Things to Know About Covering Healthcare Costs In Retirement

Consider that the average 65-year-old couple retiring today will need an estimated $363,946 to cover their healthcare costs in retirement, and this does not include long-term care costs.[1] Many people assume that Medicare will cover all of their healthcare needs, but Medicare is neither free nor comprehensive healthcare coverage. There can potentially be many out-of-pocket healthcare expenses in retirement, and a comprehensive retirement plan factors them in. No matter what your health is like now, know these 3 things about covering healthcare costs in retirement.

The Cost of Medicare

Once Americans turn 65, they might think their healthcare costs will go down thanks to Medicare. And while Medicare does help cover these costs, beneficiaries must still pay premiums. Medicare Part B base premiums, which cover expenses like doctor visits, tests, and outpatient care, increased nearly 7% for 2020 to $144.60 per month. High earners can pay as much as $12,000 in Medicare Part B premiums.[2] Keep in mind that Medicare Part B is just one piece of the retirement healthcare puzzle, and typically doesn’t cover long-term care costs. Retirees must also consider whether they will buy supplemental coverage through a Medicare Advantage or Medigap Plan, and how they will cover potential long-term care costs.

Medicare Part B Penalty

If you plan to work past the age of 65, you may want to continue coverage through your employer. If you’re covered by a qualified employer plan, you can avoid the Medicare Part B late penalty. However, know that if you’re not covered and you sign up for Medicare Part B late, you will have to pay a late penalty premium every month for the rest of your life. The penalty is 10% of your monthly premium for every 12 months you didn’t sign up for Part B coverage.[3]

Consider Long-Term Care Costs

One healthcare cost that is easy, but possibly detrimental to overlook is long-term care. According to government estimates, someone turning 65 today has an almost 70% chance of needing long-term care later in life. And, 20% will need it for longer than five years.[4] When you consider that the median annual cost of an assisted living facility is $45,000 and the median annual cost for a private room in a nursing home is over $97,000,[5] covering long-term care costs is a major feat. Medicare and Medicaid typically don’t cover costs, and paying with funds from a traditional 401(k) or IRA can trigger a larger tax burden.

Retirement decisions can be daunting. That’s why it’s important to have a trusted financial advisor to help you navigate retirement and the complexities that surround healthcare. We can work with you to create a comprehensive retirement plan that includes a plan for covering healthcare and long-term care costs. You can talk with us about all your financial planning needs during a complimentary financial review.

The commentary on this blog reflects the personal opinions, viewpoints and analyses of BML Wealth Management’s employees providing such comments, and should not be regarded as a description of advisory services provided by Cooper Financial Group. The views reflected in the commentary are subject to change at any time without notice. Nothing on this blog constitutes investment advice. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future returns.
Investment Advisory services are offered through Cooper Financial Group, an SEC Registered Investment Advisory firm. All Insurance Services are offered through BML Wealth & Insurance Services. California Insurance License #0M15550. BML Wealth Management & Cooper Financial Group are not affiliated.
We do not provide tax or legal advice, all individuals are encouraged to seek guidance from qualified professionals regarding their personal situation. Any references to protection benefits or steady and reliable income streams in this guide refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by insurance company. Annuities are not FDIC insured. Indices mentioned are unmanaged and cannot be invested into directly.

The commentary on this blog reflects the personal opinions, viewpoints, and analyses of BML Wealth Management’s employees providing such comments and should not be regarded as a description of advisory services provided by West Wealth Group, LLC. The views reflected in the commentary are subject to change at any time without notice. Nothing on this blog constitutes investment advice. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future returns.

Investment advisory services through West Wealth Group, LLC, an SEC Registered Investment Adviser. BML Wealth Management and West Wealth Group, LLC are affiliated entities. Insurance Services are offered through BML Wealth & Insurance Services, California Insurance License #0M15550.

We do not provide tax or legal advice. All individuals are encouraged to seek guidance from qualified professionals regarding their personal situation. Any references to protection benefits or steady and reliable income streams in this guide refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products.