$240,000
What the
average
couple will
need to cover
health care
in retirement
can be used later
in life.” This is
different from a
flexible spending
account, where
employees deposit
pretax dollars but
lose any money
that isn’t spent in
a given year.
Although employers sometimes contribute
to an HSA, you’re the one who controls it,
even if you leave your job. “The money goes
in pretax, earns free of tax and can be taken
out and used for qualifying medical care
without paying taxes,” Bailey says.
If you’ve already retired, you may want
to consider buying medigap insurance to
help cover the costs that Medicare doesn’t
pay. These are policies with private insurance companies, but they are limited to 10
standard plans, which make comparison
shopping easier. Once you’ve decided on
the type of plan, be sure to compare prices
for the same coverage from diferent companies. The Medicare Rights Center notes
that in Albany, N. Y., the monthly costs of premiums for a Plan A medigap policy varied
from $98.20 to $267.99. Prices also difer by
jurisdiction. One insurance company’s Plan
A charged $170 in Albany and $208 in Long
Island. In 2011, the median annual premium
for standardized medigap plans was $2,120.
The policies can be well worth the expense,
says Sunit Patel, a senior vice president at
Fidelity, because of the volatility of health
care costs from year to year. You might be
exposed to $1,000 in health care costs on average, “but one time it could be zero and another time it could be $10,000.” Traditional
Medicare has no limit on out-of-pocket costs,
although medigap insurance may cover most
of those expenses. But the Afordable Care
Act requires all Medicare Advantage private health plans such as HMOs and PPOs
(which are part of Medicare but ofered as
an alternative to the traditional program) to
place annual limits on their enrollees’ out-of-pocket costs. The maximum limit is $6,700,
but plans are allowed to set lower limits of
$3,400 or less if they choose, and some (
usually HMOs) do so. ;
Martha M. Hamilton is a former business
columnist for the Washington Post.
