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Many individuals who come to us for health insurance believe that once they reach age 65 Medicare will take care of all their medical needs.  Sadly, not only is this not true, but the cost of protection from age 65 on is much greater than most people imagine.  Although Medicare Part A (hospital coverage) is automatic and free, Parts B (physician coverage), D (prescription coverage) and supplement are not.  Additionally these costs increase annually and premiums for parts B and D are determined by an income calculation.  To put this into perspective please look below for ballpark rates for budgeting purposes:

Part A               no premium

Part B               most individuals will pay $115.40 per month, increased from $96.40 in 2009 and $110.50 in 2010 (for more details please go to : http://www.ssa.gov/pubs/10536.html)

Part D               premiums range from a low of $14.80 to almost $100 per month depending on the level of prescription coverage an insured has selected

Supplement      premiums range from $80 to $200 depending on age, gender and plan selected

The annual rate increases experienced in health insurance for those under age 65 do not go away for those eligible for Medicare.  Increases in Part B are determined by the government and only reduce if an insured has a reduction in income for the annual calculation. Premiums only reduce below the base mentioned above if an insured qualifies for Medicaid.  Currently movement from one part D to another has not required any medical underwriting, but moving from one Medicare supplement to another to reduce premium costs does require medical underwriting which becomes more difficult as an insured ages.

Add to this the cost of long term care insurance and one can see that the rocking chair retirement originally planned will be more stressful than expected.

So what does one do?

Our suggestion is to create a Healthcare Retirement Account which has one major job : provide a dividend large enough to support the healthcare costs one faces in retirement.  Not only do the premiums listed above for medical insurance and long term care need to be paid each year, but there are always those pesky copays, deductibles and doughnut holes waiting to be addressed.  Separating the assets necessary to cover these expenses will reduce the worry of providing for that medical emergency which everyone fears.  Starting early to segregate assets with an income focus might also allow individuals to take more risk in other areas of their investment portfolio.

Please allow us to help you take the steps necessary to reduce your healthcare stress at retirement.