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Planning for Medical Expenses

April 2015
Bryan E. Kelly, MS, CFP®, co-founder of The Kelly Group, specializes in portfolio management, and financial, retirement and estate planning. He has been a Certified Financial Planner™ professional since 1998 and serves as a member of many boards, including the board of Upper Chesapeake Health, the not-for-profit company that owns and operates Harford Memorial Hospital in Havre de Grace and the Upper Chesapeake Medical Center in Bel Air.

Bryan E. Kelly, MS, CFP®, co-founder of The Kelly Group, specializes in portfolio management, and financial, retirement and estate planning. He has been a Certified Financial Planner™ professional since 1998 and serves as a member of many boards, including the board of Upper Chesapeake Health, the not-for-profit company that owns and operates Harford Memorial Hospital in Havre de Grace and the Upper Chesapeake Medical Center in Bel Air.

Q: How much should I expect to pay in medical expenses throughout my retirement?

A: We have seen estimates that an average couple can expect to spend more than $200,000 in out-of-pocket health care costs throughout retirement. Of course, everyone’s situation is different. Your medical situation, age you retire, life expectancy and quality of insurance coverage all play roles in what you will spend on health care.

Q: How do I incorporate such unpredictable costs into my financial plan?

A: Creating a financial plan is not an exact science, and few factors are as fluid and difficult to pin down as medical costs. Regardless of age or life situation, when creating your financial plan, health costs must be addressed. Particularly since such costs tend to grow as you age, these costs must also be monitored and updated on a regular basis. Your health condition, inflation and the changing nature of health insurance can all impact your medical expenses.

Q: What can I do to minimize my out-of-pocket health care costs?

A: Be an educated consumer for both your medical insurance and health care services. Understand the variables among insurance options and do your best to determine the optimal choice for you, your spouse and your family. When seeking medical services, obtain information about the out-of-pocket costs you should expect. Above all, don’t be afraid to ask questions.

Q: If I retire prior to age 65, what options do I have for health insurance?

A: If you retire prior to age 65, you are not yet eligible for Medicare. Therefore, you must consult with your employer to determine if they provide retiree coverage. If not, you may consider temporarily accepting continuation health insurance coverage that your employer must offer you for 18 months after you terminate employment. Alternatively, you may find individual coverage, through either a health care agent or an exchange.

Q: What happens to my health insurance when I reach age 65?

A: In general, once you turn age 65, your primary insurance must be through Medicare. However, there is a “large employer” exception. That is, you can continue to use medical insurance obtained through work as your primary insurance if your employer has at least 20 employees. Once you leave that employer, however, that exception is no longer applicable. When you file for Medicare, but sure to also obtain supplemental coverage through either Medigap, Medicare Advantage, or if available to you, retiree coverage through an employer. Some of the Medicare-related details, such as enrollment periods, can be rather involved.

Securities offered through Cambridge Investment Research, Inc. A Broker/Dealer, Member FINRA/SIPC and Investment Advisor Representative. Cambridge Investment Research Advisors, Inc. a Registered Investment Advisor. The Kelly Group and Cambridge are not affiliated. Cambridge does not provide legal or tax advice services. This is intended to be informational and should not be used as the primary basis for estate planning purposes. Not NCUA insured, not credit union guaranteed, may lose value.

The Kelly Group
410-893-0560
www.kellygrouponline.com

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