Health care eats up 30% of retirees’ Social Security income
If you expect Social Security benefits to help cover most of your expenses as a retiree, you’re going to be very disappointed.
While your Social Security Administration retirement income will undoubtedly help sustain you in your later years, it is far from sufficient to meet all of your needs.
In fact, a disturbing new report shows that almost a third of your entire benefit check may be taken up by a key expense you face as a senior – if you receive close to the average social security benefit.
This huge cost can leave you with little room in your social security check
According to an AARP report published in December 2021, retirees with traditional health insurance ended up spending an average of $6,168 per year to cover the costs of insurance premiums and medical services.
Considering that the average Social Security benefit in 2022 is just $1,657 per month — or $19,884 per year — a retiree with a typical benefit and average medical bills could end up spending just over 31% of their entire social security check to pay for out-of-pocket expenses associated with their medical needs.
This can be a huge shock to many seniors, especially since many people expect government-provided health insurance to take care of most of their health needs. It’s also a surprise that can lead to financial devastation if you weren’t prepared to cover this significant cost and relied on Social Security benefits to help pay other bills.
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What can current retirees do to deal with this unpleasant Medicare surprise?
Unfortunately, if you’re already retired and facing higher than expected medical expenses, you don’t have many good options. It is too late to go back in time and save more for medical services as a senior.
But that doesn’t mean there’s no way to save your retirement. Here are some key steps you may want to follow:
- Shop during Medicare Open Enrollment. There are alternatives to traditional health insurance, such as Medicare Advantage plans. And you can add a Medigap plan to meet certain coverage limits in traditional health insurance. While you may end up increasing your premiums by choosing more comprehensive coverage than traditional Medicare offerings, you can also lower out-of-pocket costs when you receive care during the year with these plans.
- Check if you are eligible for Medicaid. It is possible to get additional medical coverage from Medicaid if your income and resources are low enough. Medicaid can sometimes cover things Medicare doesn’t and can often help reduce out-of-pocket expenses.
- Talk to your doctor. Your healthcare provider may be able to help you find cheaper prescriptions or take advantage of services Medicare pays more for. Your doctor can also help you develop good preventative care habits to hopefully avoid serious and costly medical issues.
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What can future retirees do?
For workers who haven’t yet retired, this shocking Medicare cost data should be a wake-up call you need to incorporate healthcare spending into your retirement plans.
You should invest a dedicated sum to cover these retirement costs – ideally in a health savings account, which offers more tax relief if you are saving for medical services.
By preparing for medical expenses in advance, you won’t face a financial shock when you start needing expensive healthcare services. You can make sure your money lasts through your final years, even with big doctor bills.
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