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Health Care in Retirement — Do You Have a Plan?
Things you can do as you grow older, both before and after retirement, to prepare financially, physically, and mentally for long-term health.
By Juhie Bhatia
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It has become clear that as you approach retirement, a key part of your maximizing your postwork years is for you to have a solid health care plan in place.
It's easy to overlook the health care needs and expenses you'll face during retirement, especially if you're healthy now. However, as life expectancies increase and health care costs rise, planning for retirement health care has become essential for protecting yourself against what could quickly become a medical or financial disaster. And the statistics are not easy to ignore: A recent study by Fidelity Investments shows that a couple, aged 65 years, retiring today must set aside approximately 5,000 to cover future medical costs, assuming they don't have retiree health insurance benefits from their employers. This is a 4.7 percent increase from the 2007 estimate.
"There's a lot of uncertainty about how quickly health care costs will grow over time," says Richard Johnson, PhD, a principal research associate specializing in retirement issues at the Urban Institute in Washington, DC. "Health care costs have been growing faster than incomes for years now, and that's unlikely to change."
Planning for Medical Costs and Coverage
Your retirement health care costs will depend on a number of factors, including your income, when you retire, your medical history and that of your parents, and your insurance coverage.
- Americans aged 65 and older are eligible forMedicare, a federal health insurance program that typically covers expenses such as hospital stays, doctor visits, and prescription drug purchases. However, some parts of the Medicare plan also include copays, deductibles, and monthly premiums. For example, the monthly premium in 2008 for Medicare Part B, which covers doctor visits, is .40. According to the Employee Benefit Research Institute, Medicare covers only about half of retiree health expenses.
- Supplemental insuranceis a way to offset these costs. This may be provided by former employers or "Medigap" policies, which are private insurance plans that cover health care costs that are not covered by Medicare. About one-third of Medicare enrollees aged 65 and older buy Medigap plans, and another third get retiree health benefits from former employers, says Johnson, who adds that many employers are now cutting back on these benefits.
- Long-term careis also an issue, because Medicare and most health insurance offer only limited coverage, adds Anna M. Rappaport, a consultant in better retirement systems and chair of the Society of Actuaries Committee on Post Retirement Needs and Risks. "Medicaid pays for a lot of long-term care, but only for those with very little income and low assets," she says. "It is important to have a plan in place to cover long-term care needs if you need help. Long-term care insurance can help finance this care and should be evaluated as an option."
Planning Where You'll Live
Another part of looking ahead to retirement is figuring out where you want to live, meaning the community where you'd like to be, your accessibility to health care, and the layout of your home.
- Current location.If you are healthy and active, you may want to stay in your current home or even consider downsizing to something smaller nearby. Either way, it's important to think about being near a physician and a hospital and having transportation available to get to both (be it by car, bus, or subway). The key is to plan for the future. Then you need to think about the layout of your home. "Don't assume your health will always be as good as it is when you first retire. About 7 in 10 people will eventually need help with basic activities as they grow older," says Johnson. "So don't buy a multilevel retirement home. Avoid having to navigate stairs when you're old and frail by keeping everything on one floor from the start."
- New community.You may also want to consider moving to a new community, because it can have a big impact on your lifestyle. "Look not only at the physical aspects of a community, clean air and water, for instance, but also at the health and lifestyle habits of the people who live there. The two are closely linked," says Nicole Duritz, AARP's Senior Project Manager of Health Strategies. For example, she says if you live near a hiking and biking trail that all your neighbors use, you'll probably use it too. Or if a farmer's market is nearby, you're likely to eat more fresh fruits and vegetables. Moira Fordyce, MD, an adjunct clinical professor at Stanford University School of Medicine, adds that you may also want to consider options in case you can no longer drive safely. For example, consider if there is a taxi or shuttle service available to help you get around or if there are groups in the community who organize days out for shopping.
Planning to Be Prepared
Being ready for a medical emergency, such as a heart attack or fall, is also a vital part of your retirement plan. Making good use of time can save your life in an emergency, so it's important to think ahead.
Emergency planning.Here are some key ways to be ready for a health care crisis:
- Know the location of the nearest hospital, and know where the emergency room entrance is.
- Familiarize yourself with the warning signs of life-threatening conditions.
- Think through what you'd do in a number of different situations if symptoms arose, such as when you're at home alone or when it is the middle of the night.
- Put together a list of important information to take with you to the hospital in the event of an emergency. Include the names of medications you're taking or are allergic to, your doctor's contact information, and information about anyone else you want to be notified.
- Call 9-1-1.If you think you're experiencing a medical emergency, the National Heart, Lung, and Blood Institute recommends calling 9-1-1 for an ambulance (instead of driving yourself). Medical personnel can help you en route to the hospital, which will lead to faster treatment once you're there, and ambulances are equipped with many lifesaving tools, such as oxygen and defibrillators.
- Electronic monitoring.If you're often home alone or are disabled, you might also want to consider getting a personal emergency response system (PERS), an electronic device that allows you to call for help with the press of a button.
Planning: You Need to Start Early
Even if you're not retiring just yet, you can plan for your future health care needs. Experts recommend that you think about health coverage when choosing a job and start saving money early.
- Participate in your 401(k)."The best way to save for retirement is by participating at work in your company 401(k). For companies that do not offer a pension, AARP supports giving these employees the option of saving through an automatic IRA," says Duritz. Johnson adds that you should avoid raiding your 401(k) when changing jobs and to always devote a portion of a raise to savings.
- Focus on wellness.The other part of planning ahead is to stay as healthy as possible now and throughout your retirement. This means focusing on preventive care and on maintaining a healthy lifestyle. Fordyce recommends eating well, getting regular exercise (30 minutes at least three times a week), consuming alcohol moderately, not smoking, and staying socially involved.
- See your doctor regularly.It's also important to stay up-to-date on physical exams and consider scheduling regular wellness visits. The earlier you detect a health problem, the better the chances are of successfully treating it, so talk to your doctor about which screening tests you need, and consider asking to receive phone call reminders so you don't forget. If you often feel rushed during your doctor visits, prepare your questions in advance so you can maximize your time there.
"The more healthy and functional the person is to start with, the better, so attention to the basics does pay off in terms of health and dollars saved," Fordyce notes.
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