This article was originally published here
When you retire, healthcare may become your single largest recurrent cost. That’s especially true if your home is paid off by the time your career ends.
That’s why it’s critical to understand what to expect from Medicare when the time comes to begin receiving coverage. However, according to new Fidelity research, older Americans aged 58 to 76 lack a critical understanding of Medicare coverage and enrollment. And this might lead to a world of financial hardship.
Closing a Huge Knowledge Gap
When Fidelity questioned Baby Boomers about when Medicare enrollment starts, 57% said age 62. While seniors can join Social Security at that age, Medicare eligibility doesn’t start until age 65.
Early retirees may face difficulties if they’re unaware of this. If you decide to quit the workforce at age 62, assuming you’ll be covered by Medicare, only to find out that you won’t be for another three years, you may struggle to afford a new health plan.
Moreover, 41% of Baby Boomers polled by Fidelity claimed Medicare has out-of-pocket spending restrictions. However, enrolling in a Medigap plan is the only method to reduce out-of-pocket expenses (supplemental insurance). If you don’t know, you might be on the hook for a slew of medical bills you can’t afford.
Finally, 40% of Baby Boomers believe Medicare pays the cost of nursing home care. That’s incorrect. When it comes to healing from an injury or treating an actual sickness, Medicare will cover the cost of a stay in a skilled nursing facility. However, Medicare won’t cover custodial care or assistance with daily living. Long-term care insurance is required to obtain this coverage.
Don’t Set Yourself Up For Financial Stress
Not understanding how Medicare works might put you in a situation where you’re ill-equipped to cover your future healthcare costs, which is something you should avoid. And you may do so by spending some time researching Medicare before you decide to retire.
At the same time, it’s a good idea to set aside money for future healthcare costs, and a health savings account (HSA) is a smart way to do so. HSA funds never expire, so you may contribute to them during your working years, invest the money you don’t need right away, and carry a comfortable balance into retirement.
You may have heard that an HSA cannot be used to cover Medicare expenditures, but that’s not true. While you cannot contribute to an HSA once enrolled in Medicare, you can withdraw funds to cover Medicare deductibles and copays.
In fact, while you’re researching Medicare, you should also learn more about HSAs. Knowing such information may motivate you to make wise decisions that will help you to cover your future healthcare bills with less worry.
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].