Home https://server7.kproxy.com/servlet/redirect.srv/sruj/smyrwpoii/p2/ Business https://server7.kproxy.com/servlet/redirect.srv/sruj/smyrwpoii/p2/ 26% of Americans misunderstand Medicare – and it can ruin their retirement

26% of Americans misunderstand Medicare – and it can ruin their retirement



When saving for retirement, it is imperative to consider all the costs you are likely to incur in your later years. Unfortunately, just over a quarter of Americans work under a major misconception about Medicare that prevents them from doing so. The fault can be costly, jeopardizing their financial security.

Millions of Americans make a huge Medicare mistake

According to Bank of America’s Workplace Benefits Report from 2020, only about half of all employees surveyed said they save money on health care expenses during retirement. For those who do not save, one of the biggest reasons was a false belief in Medicare. As many as 26% indicated that Medicare, Medicaid or Social Security would cover their healthcare costs in their later years ̵

1; and because they expect their bills to be paid, they believe they do not need to set aside money for care.

Doctor talking to patient.

Image Source: Getty Images.

The reality is that social security does not cover medical expenses. Although it provides a monthly income that you can use for anything you want, the average monthly benefit of only $ 1,519 among retirees will not go very far in paying for care for those with chronic or severe ailments. And while Medicaid provides coverage for a limited number of seniors, it is a medium-tested benefit – you need to spend most of your assets down and have very little household income to qualify for it.

Medicare do provide medical insurance coverage for most retirees, but the actual benefits you receive are far from comprehensive enough to pay for all the care you are likely to need. Medicare has some major coverage gaps as it excludes hearing aid coverage, long-term care and most vision and dental care. There are also monthly premiums that seniors have to pay for Medicare coverage as well as coin insurance costs that have to be paid out of pocket.

Since Medicare coverage is not really that extensive, most seniors end up spending thousands of dollars out of pocket even when they are covered by it. In fact, the Employee Benefit Research Institute estimated medical expenses for an elderly couple covered by Medicare in 2020 at $ 325,000 during retirement. And that’s after Medicare kicks in – many people end up having to retire before age 65, which means they retire before they become Medicare-eligible. If this happens to you, you may need to finance private insurance for several years before you can even get help from Medicare.

The bottom line is that you can not afford to make the mistake of assuming that Medicare, Medicaid and Social Security will be sufficient to cover all your medical needs in your later years. It is imperative to set aside a significant amount for health care costs.

If you have a health savings account, you can invest in it throughout your career to get tax breaks that make it easier to save for your medical services. However, if you do not qualify for one, you should definitely include health care expenses when setting retirement savings goals. You can increase the amount you contribute to your current 401 (k) or IRA so you have extra cash for care. Or you can open a dedicated account, which you only contribute to and deduct, to cover your out-of-pocket medical expenses that Medicare leaves you to pay as a retiree.




Source link