Planning For Health Care In Retirement- Part II
Postpone retirement till you qualify for Medicare
One easy way to take care of your medical bills given that you don’t have health insurance in retirement would be to continue being employed till you are 65 and hence are qualified for Medicare. However the challenge here is to stay employed in a company that provides health care benefits till you are 65 given the current economic scenario. But what if you are fired? Check out then if you are covered under spouse’s health plan and COBRA continuation coverage through your former company which typically covers you for the maximum of 18 months. Employees terminated between Sept. 1, 2008, and Dec. 31, 2009 are eligible for a 65 percent subsidy toward COBRA premiums for up to nine months under the American Recovery and Reinvestment Act passed in February.
Research shows that if you retire before you are eligible for medicare then you are likely to face the steepest medical costs. Premium for employer provided coverage on an average costs $13,308 a year for retirees under 65. Of that on an average an early retiree will pay $6,960 a year. If you don’t have employer-subsidized insurance or coverage through a spouse then you are likely in all probability to pay more. These are estimates for healthy people who don’t have any chronic health conditions or bad health habits. If you are one with bad health habits or chronic illnesses then in the first place it will be nearly impossible to get coverage and if you do manage to get coverage you are likely to pay more.
Plan for Medicare costs
Even if you are retiring with Medicare be prepared for significant out-of-pocket costs. As per data from Centre for Retirement Research at Boston College, approximately $206,000 in 2007 dollars would be needed by a couple retiring in 2009 to buy an annuity sufficient enough to cover out-of-pocket health care costs in retirement. If the couple retires in 2040 an additional $491,000 would be needed. Other studies have also shown similar staggering numbers. As per numbers provided by Fidelity Investments nearly $225,000 would be needed for a 65-year-old couple retiring in 2008 to meet medical costs in retirement. This estimation is excluding over-the-counter medications, dental care and long-term care. The Employee Benefit Research Institute estimates that even with $305,000 in hand a married couple would have only 90% chance of being able to meet out of pocket health expenses in retirement.
Read more at: Planning For Health Care In Retirement- Part I
