One of the most underestimated costs in retirement is health care, and for good reason. The figures can be staggering. A healthy 65-year-old couple should plan on $305,000 in out-of-pocket health costs during their retirement, according to a study by the Employee Benefit Research Institute. Put another way: if you plan to retire at 65 and want to buy an annuity today that will fund your retirement health care needs, a 63-year-old couple would need $200,000 and a 43-year-old couple would need $380,000, according to the Center for Retirement Research at Boston College.
Little wonder that AARP found that 62% of boomers have not fully accounted for health care expenses in their retirement planning. But it isn't just the eye-popping numbers that prevent folks from getting real. Congress and corporations are forever tinkering with benefits. Witness the complex and contentious health care reform bill, which promises to bring insurance coverage to millions who were going without insurance but will also probably leave millions of insured folks scratching their heads over what it means for them. There is one constant on this front, though: Medicare, the principle insurance source for folks who have reached 65 years of age.
Despite all the talk of cuts, Medicare is not going away. Coverage stands to change in some ways, for example, by possibly curbing access to certain medicines and procedures based on their cost. So stay on your toes as the bill is finalized and details come to light. You'll need to choose your policy wisely if you want to keep your costs from soaring even further. Then again, staying on your toes and choosing wisely have always been critical in navigating the Medicare maze. Here are a few things to keep in mind if you are new to the Medicare system.
See more questions about Medicare:
When — and How — to Enroll in Medicare
Medicare's Part A, B, D and More
How Medigap Policies Can Help
When to Buy Long-Term-Care Insurance