Medicare Doesn’t Cover This $129,000 Retirement Expense, and Social Security Definitely Won’t
Most retirees assume Medicare has their healthcare costs covered, but one common late-life expense can run six figures per year and Medicare won't pay a penny toward it. Here's what that gap means for anyone planning to live on Social…
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Part of the reason it’s so difficult to retire on Social Security alone is that those benefits don’t pay the typical senior all that much money. The average monthly retirement benefit today is $2,086, which only amounts to about $25,000 on a yearly basis.
Compounding the issue is that healthcare costs tend to rise for seniors due to aging and, in some cases, having more out-of-pocket costs on Medicare than on a generous employer health plan. That double whammy tends to strain a lot of seniors’ budgets.
It’s important to plan carefully for healthcare expenses in retirement since Social Security may not be able to cover them all, and Medicare may not pay for them all. In fact, there’s one potentially huge expense you could face down the line, and the cost might shock you.
Are you prepared to face long-term care costs?
Once you enroll in Medicare, you can expect it to cover things like hospital visits, outpatient diagnostics and procedures, and medications through a Part D or Medicare Advantage plan.
But one big expense Medicare will not cover is long-term care. And if you don’t put a contingency plan in place, you might end up struggling.
CareScout puts the average annual cost of a private nursing home room at about $129,000 on a national level. That number could be lower in some parts of the country, but it could also be higher.
And the worst part? Medicare may not even pay a dime.
Medicare is meant to cover medical issues. If you need physical therapy or a stay in a skilled nursing facility following a surgical procedure to aid in your recovery, that’s something Medicare will commonly pick up the tab for.
But Medicare won’t pay for care that’s custodial in nature. Custodial care refers to help with everyday living, like dressing and bathing, which a nursing home typically entails.
If you can’t rely on Medicare for nursing home coverage and you don’t have retirement income outside of Social Security, your options for coming up with $129,000 a year may be quite limited. And while you may qualify for Medicaid, which can cover long-term care, that’s not guaranteed.
Medicaid looks at both assets and income to determine eligibility. Even if your assets are $0, you may fall into the trap where your income isn’t nearly high enough to pay for long-term care, but it’s also too high to qualify for Medicaid.
Insurance could come to your rescue
Since Medicare won’t pay for long-term care and Social Security isn’t enough to make a dent, it’s important to put a plan in place ahead of retirement. And that could involve buying long-term care insurance in your 50s or 60s.
Long-term care insurance comes at a cost. But in exchange, it may pay for an extended nursing home stay you couldn’t otherwise afford.
And even if you don’t end up requiring a nursing home, Medicare won’t cover home health aide services either. A long-term care insurance policy might.
Retiring on just Social Security isn’t easy, but with very low expenses, it may be doable. However, paying for a long nursing home stay on Social Security probably isn’t in the cards. So it’s important to look at long-term care insurance as a backup option.
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Maurie Backman has more than a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate. Her work has appeared on sites that include The Motley Fool, USA Today, U.S. News & World Report, and Kiplinger.
Prior to becoming a full-time financial writer, Maurie worked in the financial industry trading distressed debt. She then changed course and spent a few years designing electronic toys. After a stint in content marketing and UX, she shifted back into writing and has since covered everything from the housing market to estate planning to Medicare.
When she's not busy writing, Maurie can be found hiking, walking her dogs, driving her kids to their various sports practices and games, and curling up with a good book. She cooks on occasion and bakes way too often.
