September 10, 2019 • Retirement 101 / Articles and Insights

Your Health Care Options in Retirement

As you approach retirement, what you’ll do for health care may become a big question mark. 

The answer, for many, is Medicare, the primary health insurance provider for those 65 and older. But there’s a problem: Medicare doesn’t cover all your health costs in retirement. To give you a better understanding of what Medicare covers, how to enroll, what your other health care options are, and ways to fill potential gaps in coverage, let’s take a look at some of the details.

What is Medicare?

Like we just covered above, Medicare is a federal insurance program for those age 65 or older.

There are four main “parts” of Medicare: A, B, C, and D. Here’s a quick breakdown of each one:

  • Part A: offers coverage if you’re ever hospitalized
  • Part B: offers coverage for doctor appointments and some other outpatient costs
  • Part C: offers a private plan that works as an alternative to Parts A and B. 
  • Part D: covers prescription drugs and must be purchased through a private insurer


While Medicare does cover many of your health care expenses, it doesn’t take care of dental, vision, any hearing conditions, or long-term care, which means you have to pay for those services yourself. Plus, the services that it does cover usually require you to pay a deductible, coinsurance, or copayments. Either way, you’re going to have to continue to pay for your health care one way or another.

What is Medigap?

Because Medicare doesn’t pay for all of your health care costs, Medigap exists to fill some of the void by covering what Medicare doesn’t. This is a separate policy, apart from Medicare, that you can purchase from a private insurance company. Medigap could also be useful for paying things like annual copayments and deductibles. These plans differ in coverages, so double check the details to get a full understanding of what they do and do not cover.

Like Medicare, there are different parts or types of policies. Medigap A is the standard policy, and it covers 100% of Medicare Part A’s coinsurance and hospital costs, Medicare Part B’s coinsurance, and Part A’s hospice care coinsurance. There are also Medigap plans B through M, and all vary slightly in what they cover. 

How Do I Enroll in Medicare?

When you turn 65, you’re eligible for Medicare and can enroll on the Social Security Administration’s website, or at your local Social Security office. You may be automatically enrolled in Medicare if you’re already receiving your Social Security benefits or are receiving disability benefits. 

Before and after you turn 65, you have an Initial Enrollment Period (IEP), where you can enroll for Medicare. It starts three months before you turn 65 and ends three months after your birthday. If you don’t enroll during your IEP, there are General Enrollment Periods, which is January 1 to March 31 every year, but there may a late enrollment penalty if you go this route.

What Else? 

Even if you have Medicare and Medigap, there may be health care expenses that you didn’t expect. That’s where these additional options can play a key part in helping you be prepared.
 

Even if you have Medicare and Medigap, there may be health care expenses that you didn’t expect.

Long-Term Care
Since Medicare doesn’t cover expenses that include personal care assistance or nursing home care, purchasing insurance can help protect you from any long-term care costs. Additionally, you can also purchase a long-term care rider on some insurance or annuity products, which provides you with additional benefits if you need long-term care later in life (availability and cost may vary by state).

And, before you think that you won’t need long-term care, read this: A 2018 study by the Moll Law Group, a personal injury firm, found that 70 percent of people will need long-term care, but only 46 percent think they’ll need it. They also discovered that the out-of-pocket cost for long-term care is more than $47,000 over a person’s lifetime. So, it may be worth it to purchase long-term care insurance and avoid those extra expenses.

Guaranteed Income
Guaranteed income is another way to help you plan for future medical expenses. It’s exactly what it sounds like: a consistent payout, regardless of market behavior. To create guaranteed income for yourself, consider an annuity. Apart from Social Security and pensions, annuities are one of the only financial products that can provide guaranteed income for life, and they’re primarily purchased through a financial professional.  

A Financial Professional
Meeting with a financial professional can help you get a plan in place when it comes to unexpected health care costs. They can also help you set up guaranteed income and long-term care insurance, and help make sure that whatever happens with your health in retirement, you’re ready to face it. 

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Annuities are long term financial products designed for retirement income and may not be suitable for everyone. They involve fees, expenses and limitations, including surrender charges for early withdrawals. Some include additional riders and benefits that may come at additional cost. Annuity product and feature availability may vary by state.

Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing company. Withdrawals are subject to ordinary income taxes and if taken before age 59 ½. May be subject to an additional 10 percent federal penalty.

LTC riders is subject to underwriting and may require a medical exam. Different plan designs may have various tax implications.

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