How Medical Expenses Can Impact Retirement Savings and How to Protect Yourself

Sunrise Senior Living  |  August 9, 2019
How Medical Expenses Can Impact Retirement Savings and How to Protect Yourself
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As older adults get closer to retirement, they often begin to educate themselves about Medicare. Those unfamiliar with the benefit sometimes think Medicare will pay for all their healthcare expenses once they are enrolled. The reality is, Medicare doesn’t cover all healthcare costs.

A senior can find themselves with significant expenses following a hospital stay or lengthy illness. Learning what expenses aren’t covered and how to protect your finances is important.

Understanding Medicare Coverage

Research shows that over their lifetime, a retiree will incur an average of $122,000 out-of-pocket for medical expenses Medicare doesn’t cover. For older adults who have a chronic disease or a prolonged illness, the costs can be even higher.

  • Five percent of seniors will face out-of-pocket medical bills of more than $300,000.
  • One percent will have uncovered healthcare expenses that total more than $600,000.

For a senior on a tight budget, those expenses can be catastrophic.

That’s why it’s vital for older adults to understand what expenses aren’t covered by Medicare and make sure their retirement plans address them.

Some of most common healthcare expenses not covered by Medicare Parts A and B include:

  • prescription drugs
  • physician visit co-pays
  • outpatient center deductibles
  • assisted living care
  • nursing home care
  • hearing aids
  • dental work
  • acupuncture
  • routine vision care.

Proactively planning for these types of needs can help prevent your retirement savings from being gobbled up by healthcare costs.

How to Protect Retirement Savings from Medical Expenses

  • Sign up for drug coverage: While neither Medicare Part A nor B pays for prescription drug coverage, Medicare Part D does. But you must select and pay for the coverage separately to receive the benefit. Many Medicare Advantage plans also include a prescription drug plan. Be sure to explore these options to protect yourself from the escalating costs of prescription medications.
  • Buy travel insurance: It’s also important to know Medicare will not pay for any healthcare expenses you may incur outside the country. If you are planning to travel internationally during retirement, be sure to purchase healthcare travel insurance before you depart.
  • Explore Medigap insurance: Another strategy to pay for expenses is to purchase Medigap insurance. This type of private insurance helps pay for some healthcare costs not covered by Medicare. This guide was developed by the Centers for Medicare & Medicaid to help older adults find a policy.
  • Investigate long-term care insurance: Depending on your age and health, another strategy to investigate is long-term care insurance. Don’t assume your age will make a policy unaffordable. Policies range in coverage, but some will help pay for in-home care, assisted living, and nursing homes.
  • Shop for best prescription prices: Prescription drug costs have skyrocketed in the last few years. Since older adults tend to take more prescriptions than younger people, they are among the hardest hit. Shopping around and comparing prices is easy to do with sites such as GoodRx. Visit the site, enter your zip code and prescription information, and receive a list of local pharmacies with the best prices.

One final tip is to carefully review any healthcare bills you receive. This is a good practice for older adults to follow before and after retiring. Billing errors happen and can quickly add up. Also review medical bills to make sure each one has been submitted to both your primary and secondary insurances for payment.

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