Include These 3 Health Care Costs in Your Budget

Have you prepared your retirement budget? A budget is always a valuable financial tool, but it’s especially helpful in retirement. You can use it to inform your spending decisions and protect your assets. Your budget should include a wide range of expenses, such as housing, utilities, food, travel and more.

Health care is one significant expense you shouldn’t ignore. Many retirees assume that Medicare covers all health care costs. That assumption is usually incorrect. In fact, Fidelity estimates that the average retired couple will spend $275,000 on out-of-pocket medical expenses.1

If you don’t plan ahead, medical costs could bust your budget in retirement. The good news is you can take action today by developing a strategy. Below are a few of the types of health care costs you may face. Use these to estimate your cost exposure and build your budget.


Premiums, Deductibles and Copays

While Medicare is partially funded by payroll taxes, many elements of coverage have premiums. The only component that’s premium-free is Part A, which covers hospitalizations. If you want coverage for things like doctor visits and prescription drugs, you will likely have a monthly health insurance premium.

Also, remember that all parts of Medicare have deductibles and copays. The amounts depend on your specific policy. The more robust your coverage, the higher your premiums are likely to be. You can reduce your premiums by changing your coverage, but doing so may increase your deductible and copay.


Service Not Covered by Medicare

A wide range of services aren’t covered by traditional Medicare. Dental, vision and hearing services aren’t covered by parts A and B. The same is true of physical therapy and some types of mental health treatment. Even hospitalizations and skilled nursing care are only partially covered for short periods of time.

Medicare offers a unique program called Medicare Advantage (Part C) to fill these coverage gaps. Medicare Advantage bundles traditional Medicare protection with enhanced coverage for other services, like dental and vision. Many policies also have flexibility with regard to provider networks, deductibles and copays.

Of course, since Medicare Advantage is optional, it also comes with additional premiums. A wide range of Medicare Advantage policies are available, so it’s important to consider your specific needs, budget and objectives before you purchase a policy.


Long-Term Care

According to the U.S. Department of Health and Human Services, long-term care will be a reality for many retirees. The agency estimates that today’s 65-year-olds have a 70 percent chance of needing long-term care in the future.2

Long-term care is usually a costly service. According to Genworth, the average monthly cost for an assisted living facility in 2017 was $3,750. The average cost of an in-home health aide was more than $4,000 per month.3 Many retirees need long-term care for many months or even several years, which means the expense can quickly deplete your assets.

You may want to consider purchasing long-term care insurance to cover some of the cost. You pay premiums to an insurer, which then covers some or all of your long-term care expenses. Most policies cover care provided either in a facility or in the home. Some even provide a death benefit to loved ones in the event that you don’t need the long-term coverage.

Ready to develop your health care funding strategy? Let’s talk about it. Contact us today at Peak Financial. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.






Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

17508 - 2018/3/26