Schwab MoneyWise ®

Money misconceptions: How do you plan to pay for health care once you’re retired? (2 min.)

Carrie Schwab-Pomerantz, CFP ® and senior vice president at Charles Schwab & Co., Inc., discusses how to plan ahead for potential health care costs during retirement.

[How do you plan to pay for healthcare once you retire?] I actually haven’t really thought about paying for healthcare when I’m older. I don’t know much about Medicare—I provide my own health insurance, pretty much always have. I think for a very short time, 20 years ago, someone paid for my health insurance, so—I plan on being very healthy. Eric’s response is a common one. Wouldn’t it be great if we could all count on good health throughout our entire lives? The reality is that healthcare costs are a huge issue, especially for people close to retirement. 71% of U.S. adults—both retired and still working—worry about being able to afford unexpected healthcare costs. Many folks mistakenly believe that once they reach 65, Medicare will pay for everything. But Medicare costs more than you think, and will only cover about 60% of your healthcare costs. There are a number of services that aren’t covered by Medicare at all, so to prepare, you need to consider purchasing supplemental insurance as a way to cover copays, deductibles, prescription drugs, vision, hearing, and dental care. Also consider contributing to a Health Savings Account, and possibly a Roth IRA. These are great ways to save for future healthcare expenses, and get tax benefits at the same time. You may even want to look into long-term care insurance, since Medicare doesn’t cover it. The cost of long-term care can be huge. The bottom line is that healthcare needs to be part of your retirement plan, no matter how healthy you are now. As you think about your retirement budget, factor in healthcare and make it front and center.


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