Healthcare in Retirement

The Baby Boomers are reaching retirement age but is retirement what it was supposed to be? With the changes in the fiscal, economic and tax environment, we are challenged to rethink retirement planning in response to these unforeseen changes. For the vast majority, important decisions made in the years just prior to retirement and in the early years of retirement may have an impact on their lifestyle quality for the rest of their lives.

Retirement healthcare costs have been soaring while the age for retirement has been creeping upward. If Boomers choose to retire before they become eligible for Medicare (at 65), they will need to fill the gap between workplace health coverage and Medicare coverage.

What are our choices? We could a) continue to work part time at a job that provides health insurance, b) become self-employed because, under current law, most self-employed individuals in the U.S. are allowed to deduct health insurance premiums up to net income, or c) pay all health insurance costs out of pocket.

At the start of 2007, “income-relating” – wherein government entitlement program benefits are linked to income, so that affluent will pay more or receive less- was introduced. Within a decade, it is possible that an affluent retired couple (age 65 or over) could be paying substantially more for a combination of Medicare Part B and Medigap insurance. What can Boomers do in early retirement to mitigate the cost? Now that Medicare premiums are linked to income, affluent retirees have more reason to participate in forward tax-planning strategies.