Medicare and Individual Health Insurance for Retirees

The most troubling budget line item for many people who are retired or retiring is often the cost of individual health insurance. An individual health insurance policy can cost $1000 per month for retirees who aren’t eligible for Medicare.

Most people who have employer group coverage pay some portion of the employer group premium, however because the premium is normally deducted from payroll checks it is often overlooked in retirement budget planning.

Medicare is usually much more affordable for retirees. Here is an overview of how Medicare works. You may click on key words in this post for more detailed information from the Medicare Website. Individuals who have earned 40 quarters of employment credit (10 years) are pleasantly surprised when they reach 65 that they are eligible for Medicare. People automatically qualify for Medicare due to disability after receiving Social Security for 24 months or if they have End Stage Renal Disease, or Lou Gehrig’s Disease (ALS).

Part A of Medicare is called Hospital Insurance, most people receive Part A without paying a premium. Part A covers room, board and nursing care while confined to a hospital. Part A also helps pay for Hospice and Skilled Nursing in-patient rehabilitative care. There are deductibles and co-pays under Part A, Part A does not cover medical care in or outside of a hospital.

Part B is Optional Medical Insurance, it covers medically necessary care in and outside of the hospital. Most people pay $104.90 per month for Medicare. People with higher incomes pay more. People with low incomes may qualify for a Medicare Savings Plan that will pay the premium.

Part B pays for certain preventative care with no deductible or copay. However for most diagnostic, therapeutic, and palliative (pain) care the Medicare Beneficiary pays 20% and Medicare pays 80% after the annual deductible of $147 has been met.

Many people choose to purchase a Medicare Supplement to help pay to co-pays and cost sharing associated with Medicare. Medicare requires that insurance companies offer standard plans so it is easier to shop for the lowest price. This is a wise choice because most of the medical services an individual uses during their lifetime are likely to occur when the individual is on Medicare. Without a Medicare supplement an original Medicare beneficiary would have unlimited exposure for their share of healthcare costs.

Budgeting Before and After Retirement

As important as budgeting is while you are accumulating money for retirement, it is even more important when you retire. A good pre-retirement budget puts retirement savings first. IRA’s and 401k plans allow you to save money first, even before the government takes their cut by allowing workers to save on a pre-tax basis. A budget provides a framework to pay for current expenses and save for future expenses, allowing for income and expense variations over months through the year.

About.com: Money Over 55, features a great article by Dana Anspach. In the article, “How to Make a Retirement Budget: A Retirement Budget Leads to More Fun in Retirement “, Dana outlines the steps to preparing a retirement budget. Here is a brief summary of her guidance, follow the link above to read the entire article. It even includes a budget worksheet.

 

Here are Dana’s 5 Steps:

 

After you gather your bank statements and credit cards statements along with any income information follow these five steps.

 

STEP 1 - Research your costs for health care before and after retirement.

STEP 2 – Research your costs for health care before and after retirement.

STEP 3 – List all your flexible or optional expenses.

STEP 4 – Write down some thoughts on how you want to spend your time in retirement.

STEP 5 - Calculate Fixed verses Flexible expenses.

It is pretty easy to prepare a budget when you have all of the steps laid out like this. So get started on the path to a financially stable retirement.

Why do I need a Senior Health Advisor?

During your work life you make a significant time and energy, in return your employer provides a regular income and often many additional benefits. Many employers provide short term and long term disability, pay into workmen’s compensation insurance, unemployment insurance, health insurance, dental and optional insurance.

Many employers offer life insurance for workers and their families and even a 401k savings plan so that you can defer income for retirement. Employers can really be one stop shops for most types of insurance benefits.

Some government and union employers continue these benefits for life along with pensions that guarantee life time income.

However, due to the high cost of providing health and income benefits most employers do not provide any benefits at all after retirement. This is where I come in as a Senior Health Advisor. 

I keep you connected to information from government agencies and top insurance companies with @Senior_Advisor on Twitter.

Click this link to keep connected with me on Facebook Senior Health Advisor

This video from United Healthcare illustrates a common problem I help seniors with every day Welcome to Medicare: Bonnie and the experts

Many of the employers who do offer lifetime benefits are trying to contain costs by scaling back the benefits offered to retirees. I help coordinate the benefits you receive from with your retirement with government benefits and benefits you can get through private insurance companies.

Benefits can be complicated. Understanding benefits that are offered by Medicare, Medicaid, VA, and former employer retirement benefits takes time, research and patience. Most people lack experience and expertise in these matters. As people approach retirement it is important to have a resource for advice on these matters, because they are of critical importance to your successful, prosperous and healthy retirement.

A Senior Health Insurance Advisor does not just advise you only once. I am with you throughout your retirement journey helping you update your plan along the way.