There’s a lot of confusion and misinformation surrounding crucial retirement topics such as health care, long-term care, and Social Security. Check out our frequently asked questions to make sure you know the basics before you put plans into action.
70% of Americans 65 and older will need some sort of long-term care.
A financial advisor with experience in planning for retirement may be able to identify potential gaps in your retirement plans and offer investment solutions that can help minimize the impact of major expenses. Pre-retirees can greatly benefit from an advisor who creates a plan of action that devotes a percentage of household income into investment products that will be used exclusively to pay for these potentially high costs.
Yes, your Social Security spousal/survival benefits can be used for long-term care costs.
Long-term care insurance covers personal and custodial care in different settings such as facilities, a community organization, or your home. These insurance policies compensate policyholders a daily amount for services to assist them with daily living activities.
Women generally have a higher life expectancy than men, which increases the number of years they might need long-term care. Additionally, the average stay for a woman in a nursing home is two years, and over 70% of nursing home residents are women.
Prices fluctuate based on the availability and quality of care, economic factors, and population distribution, which in turn can vary depending on state.
There are several types of long-term care. A person’s health status and cost of care can factor heavily into which type of care is best for them.
Knowing whether or not someone will need long-term care in the future is a difficult question to answer. There are multiple factors that can help predict this, but there is no way to be certain until the time comes. Your health and life expectancy are the best predictors, but because it is not certain that every person will need long-term care, it is important to plan ahead in anticipation for such costs.
Medicare is a national health insurance program for people who are 65 or older.
No, Medicare only covers half of all health care costs.
Medicare covers a limited amount of long-term care services. For example, Medicare covers up to 100 days of care in a nursing home.
Medicare coverage can begin at any time from age 65 on.
Medicare Part A: covers inpatient hospital and hospice stays. 99% of Medicare beneficiaries do not pay premiums on this Part because they contributed to Medicare through taxes while employed.
Medicare Part B: helps cover medically necessary services such as doctor visits, tests, ambulance services, and mental health care services.
Medicare Part D: also known as prescription drug insurance. Depending on the selected plan, Part D covers most or all of six main prescription drug categories, but more specialized drugs that do not fall into these categories might not be covered.
Medicare Part C: also known as Medicare Advantage. Offers the same basic coverage as Medicare Parts A and B, with an option for drug coverage (if the chosen plan does not offer this option, Medicare Part D can be used). Premiums often vary by state, and plans can charge different out-of-pocket costs for various services.
Medicare Supplemental Insurance: also referred to as Medigap or MedSupp. Sold by private companies to help defray the costs of some services not covered by Medicare. These can include, but are not limited to, additional hospital care, co-payments, deductibles, blood, and skilled nursing care. Medicare Supplemental Insurance offers a similar service to Medicare Advantage, but CANNOT be used in tandem with Medicare Advantage.
Parts A, B and D of Medicare do not cover dental, vision, hearing, and podiatry care.
Part A is paid for before retirement through payroll deductions.
Part B is paid for through a yearly deductible and monthly premiums. Premium amounts can vary depending on Modified Adjusted Gross Income (MAGI).
Part D beneficiaries pay a monthly premium, a yearly deductible, co-payments, and may also be subject to surcharges based on MAGI.
Medicare does not cover dental care.
Not all drugs are covered under Medicare Part D. Coverage depends on the selected plan.
Medicare Part D plans are sold by Medicare-approved private insurance companies. The states in which these companies operate regulate pricing, causing the cost to fluctuate from state to state.
According to a study published by Credit Suisse, 33% of a person’s current income is projected to be spent on health care costs.
Social Security is a federal program of social insurance and benefits. Individuals who are retired, disabled, or widows of beneficiaries of the program may benefit from Social Security. Benefits are based on how much money a person made throughout his/her employment history. The more lifetime income earned, the greater the benefit can be.
The Social Security benefit you receive is based on your primary insurance amount (PIA), which is based on your 35 best paying years when accounted for inflation.
A person can start collecting their Social Security benefit at age 62. However, if collected before their Full Retirement Age (FRA), their benefit will be reduced significantly.
The age at which a person can claim their full Social Security benefit without early deduction penalties.
If a person with an FRA of 66 collects their benefit at the earliest age of 62, their total FRA benefit will be reduced by 25%. If a person collects their benefit at age 63, their total FRA benefit will be reduced by 20%. At age 64, 13.3%, and at age 65, 7.3%.
The money allocated for your Social Security taxes are not held for you to access for when you retire. The system pays forward so that contributions are distributed to eligible beneficiaries.
Yes, you can still receive your spousal benefit even if you are divorced. However, you must be unmarried, age 62 or older, have been divorced for at least two years, and marriage must have lasted for ten years or longer.
No, you would receive your new spouses benefit.
Survivors receives 100% of their deceased ex-spouse’s Primary Insurance Amount (PIA), and can file for survivor benefits starting at age 60.