By the time you retire, your accumulated wealth is probably at its height. The challenge now is to manage your assets so that they last as long as you do. Insurance still plays an important role at this stage of your life.
Most people under 65 get group health insurance through their or their spouse’s job. Group health insurance costs less than individual health insurance. Most people who are 65 and older get Medicare from the federal government. Medicare has two parts:
- Hospital Insurance (Medicare Part A) helps pay hospital bills; and
- Medical Insurance (Medicare Part B) helps pay for doctor bills.
Anyone enrolled in Social Security is automatically signed up for Medicare when turning 65. Anyone not on Social Security can sign up for Medicare at the local Social Security office.
Initially, most people get Medicare Part A coverage when signing up. There is no fee involved. Medicare Part B is optional and has a fee. Generally, individuals who are still working and covered by a employer-provided group health plan not need Medicare. It’s best to keep group coverage for as long as possible. Some employers may continue health care coverage for long-time employees when they retire. But Medicare becomes the primary insurer and the group coverage will pay only when Medicare does not provide coverage. Those on Medicare without such group coverage to fill in health care gaps can buy a Medicare Supplemental or Medigap policy, regardless of health. Anyone who misses this “open enrollment” period may not be able to subsequently buy the Medigap coverage desired.
Long-term care insurance is not part of Medicare and is purchased from private insurers. It is designed to pay for the many services needed by people who suffer from chronic long-lasting illnesses and need regular care, usually in a nursing home, but in some cases in-home care. For those who have this coverage, at least two activities of daily living, such as bathing, eating, dressing, continence and mobility, and/or cognition must be lost in order for the coverage to take effect. While this primarily affects the elderly, a substantial number of cases involve people under the age of 60.
Married retirees need to review their financial situation and determine how much income a surviving spouse would lose. Such income losses frequently result from reductions in Social Security payments. For example, a husband may receive $1,500 a month in benefits while his wife gets $1,000 a month, for a total of $2,500 a month. If the husband dies, his widow would get his $1,500 payment but she would lose her $1,000 payment. That could be a 40% reduction in family income. A substantial loss of income also can result from reduction in pension or annuity payments. The investment strategy for seniors should emphasize income-producing and liquid instruments that can supplement retirement income and Social Security.