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April is Financial Literacy Awareness Month
How Social Security and Medicare Work Together to Maintain Your Financial Health
Health care costs in retirement now average over $315,000 for a married couple, so says the investment firm, Fidelity. Such numbers are just estimates. Your actual health care costs can vary greatly. But there are steps you can take now to care for all aspects of your health as you age, even your financial health.
An important first step is to learn about programs such as Social Security and Medicare that can help pay for your health care services. Social Security can provide a monthly cash benefit to help maintain your financial health. Medicare plans provide health coverage that can reduce the out-of-pocket costs associated with your health-related expenses. Though they are different programs, they can work together to support your financial health.
Knowing the rules that govern your personal retirement savings plan is also a smart move. Medicare does not cover all healthcare expenses completely, and most people will need to supplement their Social Security income with savings.
People generally rely on three sources to pay for their healthcare in retirement.
- Social Security
- Retirement savings
- Medicare
1. Using your Social Security benefits
For many of us, Social Security is the major source of retirement income. The federal government runs the program. It pays monthly cash benefits to millions of eligible people. The amount of your monthly benefit is based on a number of factors. Your benefit is the average of your 35 highest-income years. So, the longer you work and the more you earn, the bigger your Social Security check will be.
2. Using retirement funds from your savings plan
Social Security is not meant to pay for all your expenses. Most people will need to use personal savings, too. A popular way to save for retirement and get some tax advantages involves putting money in retirement accounts. These accounts are often available through your employer. For instance, a 401(k) or a 403(b), an individual retirement account (IRA) or a health savings account (HSA).
3. Using your Medicare benefits
Most of us will rely on Medicare to pay for much of our healthcare as we age. Like Social Security, when you start receiving Medicare benefits depends on your age. If you choose to take your monthly Social Security benefit before you turn 65, you’ll automatically be enrolled in Medicare Part A and Part B, the parts of Medicare that help cover hospital costs and doctor’s visits.
The important thing is to know your needs, explore your options, then make educated decisions on how to best take care of all aspects of your health. Using all three legs of the stool can improve the whole you — including your financial, emotional and physical health.
For more information on maintaining your financial health, read here.
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