You Are Underinsured
Cutting costs in retirement is important, but scrimping on insurance might not be the best place to do it. Adequate health coverage, in particular, is essential to prevent a devastating illness or injury from wiping out your nest egg.
Medicare Part A, which covers hospital services, is a good start. It’s free to most retirees starting at age 65. But you’ll need to pay extra for Medicare Part B (doctor visits and outpatient services) and Part D (prescription drugs). Even then, you’ll probably want a supplemental medigap policy to help cover deductibles, copayments and such. “Medicare is very complex, and it’s more expensive than people realize,” says Schwab-Pomerantz. “So it definitely needs to be part of the budgeting process.”
And don’t forget about other forms of insurance. As you age, your chances of having accidents both at home and on the road increase. In fact, according to the Insurance Institute for Highway Safety, the rate of fatal car accidents starts to skyrocket once drivers hit age 75. Beyond your own medical expenses, all it can take is a single adverse ruling in an accident-related lawsuit to drain your retirement savings. Review the liability coverage that you already have through your auto and home policies. If it’s not sufficient, either bump up the limits or invest in a separate umbrella liability policy that will kick in once your primary insurance maxes out.