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Retirement planning: Six myths, busted

Retirement planning can be complicated – the wants and needs that need to be accommodated in our retirement years vary from person to person, so it's hard to get sound advice. Still, there are certain myths about retirement that persist. Here are six of the most common, along with helpful tips and tools for taking some of the guesswork out of retirement planning. 

5. Myth: Medicare will cover all of your medical costs

David Banks/AP/File
Members of Progressive Change Campaign Committee, upset over potential cuts to Medicare, Medicaid, and Social Security, walk to President Obama's campaign headquarters in Chicago in 2011.

A 65-year-old couple that retired in 2013 can expect to pay $240,000 for medical needs over the course of their retirement, and that doesn’t include long-term care, according to figures from Fidelity Investments and the AARP. That includes the cost of deductibles and copayments, premiums for optional coverage for doctor visits and prescription drugs, out-of-pocket expenses for prescription drugs, and other expenses that Medicare doesn't cover, including hearing aids and eyeglasses. Two options can help make up the difference: A health savings account (HSA), which is often available as part of a high-deductible employee health plan, and medigap insurance. Medigap insurance is sold by private insurers. Ten different types of standard plans are available based on your anticipated needs, and they can help protect against the volatility of healthcare costs.

The good news, however, is that the Affordable Care Act has mitigated that part of anticipating healthcare costs somewhat, because it limits the rate at which your out-of-pocket costs can grow each year. The ACA is also designed to help Medicare recipients with their prescription costs, by offering steep discounts once the gap in Medicare Part D's prescription drug coverage is reached. 

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Mark Sappenfield
Editor

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

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