Planning for Retirement

Help yourself get the most out of retirement by thinking about future health care needs now.

Retirement is a big milestone in everyone's life, and with the ever-changing economy the idea of retiring means different things to different people. It is more important than ever to consider your personal definition of what retirement means to you and plan for the future with those goals in mind. With everything you want to accomplish in retirement, making sure you've thought through all the issues before you get there is an important part of planning.

Everyone talks about making sure your finances are in order, but have you given any thought to your health care needs? Considering that medical and long-term care get more expensive every year, and as we age we're more likely to need some form of it, including health insurance in your retirement plan certainly makes sense.

This Action Plan is intended to help you handle a challenging planning process - and hopefully avoid a few missteps along the way. Please be aware that this is an overview, not a comprehensive blueprint covering every situation.

First Steps

Consider your health care options:

  1. Review the various sources of Medicare information available on this website.
  2. Check your Medicare eligibility date
    • If retiring before Medicare eligibility, investigate coverage on younger spouse's employee health plan, or employer-sponsored retiree health plans, if available
    • Learn about COBRA, which allows you to continue your employee plan for up to 18 months
    • Find out about individual coverage through the Health Insurance Marketplace, at HealthCare.gov
  3. Look into coverage for extras, including dental, vision, and hearing care which are not always included in Medicare or other health plans
  4. Look into long-term care insurance, which is not included in Medicare or other health plans and helps cover:
    • Home health care
    • Nursing care
    • Assisted living
    • Other long-term care expenses

Next Steps

  1. Consider your finances:
    • Calculate current living and health expenses and identify where spending may go up, or down, after retirement - this will give you a starting point for estimating retirement needs
    • Evaluate existing retirement income sources, including Social Security, 401Ks, IRAs and pensions to estimate your total income
    • Combine lists to decide whether estimated income will cover likely expenses
  2. Find ways to close the gap:
    • If your estimated income won't likely cover your estimated expenses, consider:
  3. Evaluate life insurance coverage:
    • Is your current policy linked to your employment and, if so, will coverage end at retirement?
    • Is your current plan still appropriate or should you consider different solutions?
    • Given your situation, should you increase coverage to ensure security for a surviving spouse or family member?
    • Are there other reasons to increase coverage, such as contributing to a grandchild's education?

Finish Up

Take steps to protect your health:

  • Increase use of preventive health care programs offered by employer or insurer
  • Take advantage of current coverage to get regular checkups, tests and screenings
  • Make lifestyle changes that reflect advancing age and emerging risks
  • Estimate retirement health care costs - unexpected changes in health can lead to more co-pays, prescription costs and other expenses. See AARP's Health Care Costs Calculator

Increase savings in anticipation of future health care expenses, which will be determined by health, retirement age and where you live.

Action Plan

There's a lot to think about with retirement. By getting an early start and following sensible steps, you should have a fair amount of confidence and security when the big day finally rolls around. Here are the details that should help you carry out the steps above.

Understanding Your Health Insurance Options

With so many health care options, how do you decide what's right for you? Start with the easiest options - weigh the coverage you could receive from employer-sponsored plans from your employer, or your spouse's, if available, against any Medicare coverage for which you are eligible. Whatever plans you look at be sure to consider coverage, benefits, convenience, and total costs. In addition to premiums, find out about co-pays, deductibles, prescription costs, and costs associated with using out-of-network providers.

Employer-sponsored retiree health plan

Find out if your employer offers coverage for retirees. If so, this may be a simple, affordable option. Contact your HR or benefits department.

Spouse's employee health plan

If your spouse will be employed after you retire - and he or she is covered by an employee health plan - you may be eligible to join that plan quickly and at a reasonable cost. Contact your spouse's Human Resources or benefits department.

COBRA

This federal program allows you and your covered dependents to stay on your company's plan for up to 18 months after retiring - giving you extra time to find replacement coverage or reach Medicare eligibility. Your coverage will not change, but your premiums will increase since your employer will no longer be contributing. Contact your Human Resources or benefits department.

Medicare

The government's Medicare program offers affordable, comprehensive coverage. Check your eligibility at the Medicare.gov website. To find Medicare plans that carry the AARP name, visit the Product Finder Tool on this site.

Health Insurance Marketplace

You may want to consider a new plan from a private health insurer. You may find coverage that better meets your needs and budget by shopping and comparing plans on the Health Insurance Marketplace exchange. Financial help may be available based on your income. Insurers -- whether offering plans on these exchanges, on private exchanges or directly to individuals -- can't deny you coverage or charge you more because of pre-existing conditions. They also cannot drop your coverage if you get sick.

For more information contact you state's Department of Insurance, the National Association of Insurance Commissioners, an insurance broker or visit HealthCare.gov.

Long-term care insurance

Long-term care insurance is not health insurance. Rather, it's designed to pay for services not covered my most plans, such as nursing homes, assisted-living facilities and home health aides. This coverage tends to get more expensive the closer you approach retirement age. Consider getting a policy well before retirement to lock in lower rates and make it more affordable. Request a free consumer guide from the National Association of Insurance Commissioners at their website. For plans made available by AARP, visit the Product Finder Tool on this site.

Creating a Financial Plan

Creating a sound retirement plan isn't as hard as many people think. Of course, it helps to have access to financial information and Financial Advisors using plain language.