Older Americans Are Sorely Misinformed About Medicare — and That Could Hurt Them During Retirement

Once you retire, you may find that healthcare becomes your single greatest recurring expense. This might especially hold true if your home is paid off by the time your career comes to an end.

That’s why it’s so important to know what to expect from Medicare once the time comes to start getting coverage. But recent data from Fidelity reveals that older Americans aged 58 to 76 lack key knowledge when it comes to Medicare coverage and enrollment. And that could result in a world of financial pain.

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Closing a glaring knowledge gap

When Fidelity asked baby boomers when Medicare enrollment begins, 57% indicated age 62. But while that is when seniors are allowed to first sign up for Social Security, Medicare eligibility doesn’t begin until age 65.

Not knowing that could prove problematic for early retirees. If you make the decision to leave the workforce at age 62 thinking you’ll be covered under Medicare, but then discover that won’t be the case for another three years, you might struggle to cover the cost of a different health plan.

Furthermore, 41% of baby boomers surveyed by Fidelity said there are limits on out-of-pocket spending under Medicare. But the only way to limit out-of-pocket spending is to enroll in a Medigap plan (supplemental insurance). Not knowing that could leave you on the hook with a host of healthcare expenses you can’t easily afford.

Finally, 40% of baby boomers said that Medicare covers the cost of nursing-home care. That’s false. Medicare will cover the cost of a stay at a skilled nursing facility as it relates to recovering from an injury or treating an actual illness. But Medicare doesn’t cover custodial care or help with everyday living. To get that coverage, you’ll need to buy long-term care insurance.

Don’t set yourself up to struggle financially

Not knowing how Medicare works could leave you in a position where you’re ill-equipped to cover your future healthcare bills, so that’s a scenario worth avoiding. And you can do so by spending some time reading up on Medicare before you’re ready to think about retiring.

At the same time, it pays to allocate money to future healthcare expenses, and a health savings account (HSA) is a good option in that regard. HSA funds never expire, so you can contribute to these accounts during your working years, invest the money you don’t need to withdraw right away, and carry a nice balance with you into retirement.

You may have heard that you can’t use an HSA to cover Medicare expenses, but that’s not at all true. While you can’t contribute to an HSA once you’re enrolled in Medicare, you can absolutely take withdrawals to cover things like Medicare deductibles and copays.

In fact, while you’re reading up on Medicare, do yourself a favor and learn more about HSAs, too. Having that knowledge could push you to make smart decisions that allow you to cover your future healthcare costs with less stress.

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