According to the Consumer Bankruptcy Project, retirees are the fastest-growing segment of our population filing for bankruptcy, and 39% of bankrupt retirees do so on account of medical expenses. This sad statistic is largely attributable to (i) a lack of awareness regarding the amount of money needed to cover out-of-pocket medical expenses in retirement; (ii) misunderstandings about Medicare coverage; and (iii) failing to consult with a certified financial planner, estate planning attorney, and/or elder care attorney well before planned retirement.
When asked, 69% of baby boomers and 66% of retirees estimate that their health care costs in retirement will be $100,000 or less. However, the Employee Benefit Research Institute (EBRI) states that the average retired couple will actually spend about $265,000 in out-of-pocket medical expenses in retirement (includes Medicare premiums and out-of-pocket health care costs relating to all Medicare plans and supplemental insurance plans). Knowing the amount of money you may need for such out-of-pocket medical expenses is crucial to proper planning for a comfortable retirement.
While many pre-retirees assume that Medicare will cover all of their health care expenses after age 65, data compiled by EBRI suggest that Medicare will cover only about 62% of those expenses. Therefore, Medicare-eligible retirees should consider purchasing additional Medicare insurance (Medicare Parts B and D) or purchasing a "Medigap" policy from a private company to cover expenses not covered by Medicare Parts A, B and D, such as co-pays and deductibles. However, Medicare and Medigap plans do not cover the cost of hearing aids, which average $2,300 for just one ear. Nearly 25% of Americans age 65-74 suffer disabling hearing loss. So, again, the cost of hearing aids is an expense for which you may need to plan and budget.
In addition, 44% of men and 58% of women over age 65 will require some type of long-term care, which is NOT covered by Medicare. The average cost of an apartment in an assisted living facility is over $47,000/year, and 24/7 care in a semi-private room at a nursing home exceeds $92,000/year. A certified financial planner, estate planning attorney, and/or elder law attorney can help you plan for these expenses by advising you about long-term care insurance, cash value life insurance, and other strategies for ensuring you will not run out of money in retirement on account of medical expenses. Knowledge is power.
To read more posts about pension issues, please go to my Facebook Page www.facebook.com/PensionJustice4You and if you like it, share it with your Friends!