A few weeks ago we outlined five common investor mistakes. All of those mistakes presuppose you are saving money for retirement. Savings are essential to any retirement plan, but most people have other needs, too. What about health care? After all, Medicare doesn’t start until age 65. Has your investment advisor talked to you about saving for medical expenses until you’re eligible for Medicare?
The dust is still settling from Washington’s recent health care debate. Baby Boomers are, of course, quite concerned about the legislation. Boomers will be needing health-related services soon and they’re a big voting bloc.
Boomers who manage to retire early or otherwise lack employer-sponsored coverage had best hope not to have any chronic health problems. According to the Commonwealth Fund Survey, over 60% of working adults between ages 50 and 64 have been diagnosed with a chronic health issue like heart disease, high cholesterol, or arthritis. In addition, 20% of these adults – nearly 7 million boomers – have no health insurance. Bad health and no coverage is a big reason to be concerned.
The new health care plan tries to address the problem for one segment of this population. Starting in June 2010, $5 billion will fund health care costs for early retirees: former workers who are neither active employees nor eligible for Medicare. According to the White House fact sheet, “For each such early retiree (and his or her spouse, surviving spouse, and dependents), the employer plan will receive up to 80% of costs, minus negotiated price concessions, for health benefits between $15,000 and $90,000.” This should cover most boomers formerly connected to employers, unions, or other such groups.
What if you’re self-employed or can’t get coverage through those groups? A new national high-risk insurance plan is supposed to be set up within 90 days. This temporary insurance “company” is supposed to provide affordable health insurance for people with preexisting conditions, including boomers who can’t get coverage anywhere else.
This plan is not free. According to the Christian Science Monitor, premiums will run a maximum of $5,950 for individuals and $11,900 for families per year. The coverage will expire when states establish health exchanges with competing insurance providers.
Although health care reform has passed, the battle for the current plan is far from over. Attorneys General from several states have filed suit against Federal government. The Supreme Court no doubt will weigh in on the legislation and mid-term elections could affect the results as well.
Socking away cash for potential health issues is a good idea even if you are not yet 65. You may need it to pay premiums or for future health problems. As Ben Franklin once quipped, ‘an ounce of prevention is worth a pound of cure.’