When saving for retirement, it is imperative to consider all the expenses you are likely to incur in recent years. Unfortunately, just over a quarter of Americans work under the great delusion of Medicare, which prevents them from doing so. The mistake can be costly, threatening their financial security.
Millions of Americans make a huge mistake in Medicare
According to the Bank of America Workplace Income Report 2020, only about half of employees surveyed say they save money on health care retirement costs. For those who don’t save, one of the biggest reasons was a misconception about Medicare. A full 26% say Medicare, Medicaid or Social Security will cover their healthcare costs in the coming years ̵
The reality is that social security does not provide any coverage for 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 retired workers will not go very far in paying for care for those with chronic illnesses or serious illnesses. And while Medicaid provides coverage to a limited number of seniors, it’s a cost-tested advantage – you need to spend most of your assets and have very little household income to qualify for it.
Medicare right provide health insurance coverage for most retirees, but the actual benefits you will receive are far from comprehensive enough to pay for all the care you may need. Medicare has some major gaps in coverage as it excludes coverage for hearing aids, long-term care and most vision and dental care. There are also monthly premiums that retirees have to pay to cover Medicare, as well as co-insurance costs that have to be paid out of pocket.
Because Medicare coverage isn’t really that comprehensive, most seniors end up spending thousands of dollars out of pocket, even when covered by it. In fact, the Employee Income Research Institute estimates the medical costs for adult couples covered by Medicare in 2020 at $ 325,000 throughout retirement. And that’s after Medicare was launched – many people eventually have to retire before age 65, which means they retire before they can qualify for Medicare. If this happens to you, you may need to fund private insurance for several years before you even get help from Medicare.
The bottom line is that you can’t afford to make the mistake of assuming that Medicare, Medicaid, and Social Security will be enough to cover all of your medical needs for years to come. It is mandatory to allocate significant amounts of money for health care costs.
If you have a health savings account, you can invest in it throughout your career to receive tax breaks that make it easier to save on your medical services. But if you do not qualify for one, you will absolutely have to take health care costs into account when setting retirement savings goals. You can increase the amount you contribute to your current 401 (k) or IRA to have extra care money. Or you can open a special account in which you contribute and draw from it only to cover your medical expenses, which Medicare leaves to pay as a retiree.