2023 Q3 In Review - Integrity Wealth Advisors, Ventura & Ojai, California

HEALTH CARE COSTS IN RETIREMENT – ARE YOU PREPARED?
Even if you've been saving diligently, health care costs can throw a wrench in
your retirement plans. A report from the Employee Benefit Research Institute
estimates a 65-year-old couple could need as much as $383,000 in savings
to have a 90% chance of covering their health care expenses—including
premiums, deductibles, prescriptions, and out-of-pocket costs—in retirement.
Here are four strategies to consider before you reach retirement age.
1. MAKE THE MOST OF AN HSA
If you're enrolled in a high-deductible health care plan (HDHP) that offers a
health savings account (HSA), consider using it to sock away extra money
for future medical needs. You can make tax-deductible contributions of up
to $3,850 for individual coverage and $7,750 for a family in 2023—plus an
additional $1,000 for those ages 55 and older.
Your earnings grow tax-free, and withdrawals of contributions and earnings are
tax- and penalty-free when used for qualified health care expenses, including
Medicare and long-term care (LTC) insurance premiums. And once you reach
age 65, withdrawals from an HSA can be used for any purpose without penalty,
although ordinary income taxes will apply to funds used for nonmedical
expenses.
2. ENROLL IN MEDICARE AT THE RIGHT TIME
Most near-retirees know Medicare becomes available at age 65, but fewer
realize there's a permanent penalty for missing the initial enrollment period
(IEP). Your IEP is a seven-month span, including the three months before, the
month of, and the three months following your 65th birthday. If you fail to
apply during your IEP for Medicare Part B—which covers most everyday
(outpatient) medical expenses—your monthly Part B premiums could go
up 10% for every 12-month period, you go without coverage. There's
also a 1% penalty per month for each month you delay enrolling in
Part D prescription drug coverage (see "The ABCDs of Medicare").
group health care plan for hospitalization. However, once you enroll in
Medicare, you can no longer contribute to an HSA, so if your plan is to stay
with your group health insurance and to keep contributing to an HSA after age
65, you may want to postpone enrolling in Part A.
Once you or your spouse no longer has employer-sponsored health insurance,
you'll have eight months to sign up for Medicare during a special enrollment
period (SEP) to avoid penalties.
3. REDUCE YOUR MODIFIED ADJUSTED GROSS INCOME
Medicare premiums are also affected by your modified adjusted gross income
(MAGI). Relatively higher-earning retirees may be subject to Medicare's
Income-Related Monthly Adjustment Amount (IRMAA), which is a surcharge
on the monthly premiums for Parts B and D if your MAGI from two years prior
exceeds $97,000 ($194,000 for married couples filing jointly). The differences
in premiums for Part B, in particular, can be steep, so taking steps to reduce
your MAGI could lower your medical costs as well.
4. PLAN FOR LONG-TERM CARE
Long-term care covers the costs of activities of daily living and can be
a significant risk to your financial situation in retirement without careful
planning. Long-term care insurance can seem costly but with the average
annual cost of a private room in a nursing home at nearly $108,405, it may be
more expensive not to have it.
If you begin collecting Social Security before your 65th birthday,
you'll automatically be enrolled in Part A (which covers hospital
stays and is generally premium-free) and Part B. But if you
plan on waiting to collect Social Security, be sure to apply for
Medicare as soon as you're eligible.
Be aware that Medicare coverage can be affected if you or
your spouse is still working and enrolled in an employer's
health care plan. For example, you may be able to delay
signing up for Part B without penalty until workplace
coverage ends. You could enroll for Part A while being
covered by an employer plan—generally, you'll have no
premium costs, and Medicare will pay secondary to your