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The Hidden Pitfalls of Healthcare Costs and What They Mean for Your Retirement
Healthcare in retirement

Thinking about your retirement is exciting, but if you're like most people, there's some uncertainty surrounding your plans. You're looking forward to doing all of the things you've been putting off while working hard and saving - whether it's your dream vacation, a move to warmer climates, or just spending more time doing the things you enjoy with the people you love. At the same time, you worry that you may not be totally prepared to make the retirement decision when the time comes.

You've probably been over your finances a thousand times, and prepared a hundred different budget scenarios, but even the best prepared retirees often underestimate the cost of healthcare during their retirement. You've paid the taxes, and you think you'll be covered, but too often people assume that Medicare will take care of everything. This, unfortunately, isn't always the case.

Insurance premiums, co-pays, deductibles and prescription drug coverage can easily add up very quickly. According to a recent study by Fidelity Investments, most retiree couples budget $50,000 on average for these expenses. The reality is that they will need on average $220,000 to meet these costs. Most people are not experts at budgeting, and that's why hiring a financial advisor is something that will usually pay off in the long run.

Another issue to consider is the Affordable Healthcare Act's individual mandate penalties. Many Queens and Long Island residents who are nearing retirement are foregoing insurance for the last few years before they become eligible for Medicare. In 2015, the penalty for doing so will increase significantly, leaving many with an unpleasant surprise when filing taxes next year. The penalty will be 2% of total household income, or $325 per person, whichever is greater. Foregoing healthcare is always a risk, and you may be saving less money than you think by taking it.

What can you do?

• Look into Medicare Supplement Plans -
Also called Medigap, this is supplemental insurance that can help retirees cover co-pays, as well as a wide range of deductible costs.
• Consider Medicare Part D - Medicare can leave retirees on the hook for the high cost of prescription drugs, even those with Medigap coverage. Those needing a number of expensive prescriptions can find substantial savings by enrolling.
• Talk to a Financial Advisor- With all the variables involved, including insurance plans, tax deductions and wanting to maximize your investments, consider working with a financial advisor.

With retirement around the corner, and enough to think about just with your IRAs and 401(k)s, the added element of healthcare can trip up even the savviest planners. Try a consultation with a financial planner, and you could reduce your taxes, increase your deductions, and fortify your plans for a dream retirement.


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