Retirement planning involves a careful assessment of the expenses that you may face during your senior years. As you are making plans for the future, you should have a thorough understanding of what you can expect from the Medicare program.
Let’s look at some of the details.
To qualify for Medicare, you earn retirement credits. As you work and earn income, you pay taxes, and some of what you pay goes toward future Medicare coverage.
The requirements are actually quite modest. In 2014, you earn one retirement credit for every $1,200 that you earn. The maximum annual accrual is four credits, even if you make more than $4,800 during the year.
If you accumulate at least 40 credits over the years, you will qualify for Medicare coverage when you reach the age of 65.
There are out-of-pocket expenses that go along with Medicare coverage. Medicare Part A is the segment of the program that would cover a stay in a hospital. There is no monthly premium for this coverage, but there is a deductible, and there are co-payments for extended stays.
Part B is the portion of the program that pays for outpatient care and visits to doctors. You pay a monthly premium for Part B coverage. The exact amount of the premium that you pay is based on your income. Most people are paying around $105 per month in 2014, and this is typically deducted from your Social Security direct deposit.
Medicare Part C allows you to use your benefit to purchase private insurance that would encompass medical services that are typically covered by Parts A and B.
Medicare Part D is a prescription drug plan, and you must pay a premium for this coverage.
These are some rather significant out-of-pocket expenses that you should be aware of when you are creating a retirement budget.
A Big Gap
In addition to the above out-of-pocket expenses, there is a very big gap to take into consideration: Medicare will not pay for long-term care. If you need help with your activities of daily living, you cannot count on the Medicare program to help with the costs, and they are are considerable.
Most people will eventually need long-term care, so this is something that is relevant to all of us.
Medi-Cal is a need-based government health insurance program that does cover long-term care. To qualify, you must have limited financial resources in your own name.
Many people give assets to their loved ones before they apply for Medi-Cal, but you must act in a careful and informed manner, because program rules are complex.
Free Elder Care Consultation
If you are concerned about long-term care costs, we can help. Our firm focuses on elder care matters, and you can send us a message through this page to request a free consultation: Campbell CA Medi-Cal Planning.