Health Care Costs in Retirement

Health Care Cost for retirees

The one expense that is your only mandatory expense in retirement

 The rules to retirement have changed and unfortunately what people don't know about retirement will hurt them.

There have been four distinct changes that will impact anyone and everyone who may be or plan on receiving Social Security in retirement. These changes will, unfortunately, turn how the concept of saving for retirement and tax deferral on its head, they are:

 1) Medicare is Mandatory:

 In order to collect Social Security one must accept Medicare as well when eligible.

For those that start to collect Social Security at age 62 and then when eligible for Medicare, decline that coverage they will, by means of the IRS, have to pay back every dollar received from Social Security

2) Medicare is Means Tested:

Your income will be used to determine your Medicare Part B & D premiums: the more you have the more you will pay

 3) You pay for your Medicare through Social Security:

Certain premiums along with any surcharges are automatically deducted from your Social Security benefit.

With Medicare inflating at over 7% and Social Security cola's in 2014 being only 1.5%, there is a better than average chance that you will lose your Social Security benefit.

 4) Income is almost everything in a financial plan:

Social Security defines income as “your adjusted gross income + tax exempt income or everything on lines 37 & 8b of the IRS form 1040”.

Examples of income are: 

Social Security benefits, Wages, Pension Income, Rental Income, Capital Gains, Dividends including Muni Bonds, any withdrawal from Traditional IRA's, 401(k)'s, 403(b)'s, 457's and SEP IRA's and certain Annuities too.

 What is not considered income:

  1. Qualified distributions from a Health Savings Account (HSA)
  2. Qualified distributions from a 401(h) plan
  3. Qualified distributions from Roth accounts
  4. Monies from Reverse Mortgages
  5. Withdrawals from the cash value of Life Insurance 

 Again, you have a mandatory expense in retirement there anyone helping you plan for this....anyone?