Is health care part of your retirement plans?


What you need to know about health care costs post-retirement and the taxability of municipal bonds.

Key Points

Q: I'll be retiring from my practice at the end of the year at age 65, but I'm concerned about planning for future health care costs. What do I need to know?

More recently, many physicians find that the definition of "retirement" is no longer so cut and dried. Some are choosing to retire early, while others are choosing to work in a different capacity well past the traditional retirement age of 65. In addition, retirement is now often defined by activities such as travel, returning to school, volunteer work, or the pursuit of favorite hobbies or sports.

The original Medicare program pays for many, but not all, health care services and supplies. Many retirees will also consider purchasing a "Medigap" policy, sold by private insurance companies, to help pay some of the health care costs (the "gaps") that the original Medicare program does not cover, including co-payments, coinsurance, and deductibles.

Retirement health care planning must also take "incapacity" into consideration. Major health problems such as a stroke, a heart attack, the onset of Alzheimer's disease or other forms of dementia, or simply becoming weak and frail from advancing age can result in the inability to care for yourself and/or manage your own affairs. There are two issues to consider:

Paying for custodial care. Medicare and other types of health care insurance are designed to cover "acute" medical conditions. They do not pay for costs associated with custodial or maintenance care for an individual whose health problems require nursing home care. Rather than pay these costs out of pocket, many individuals purchase a long-term care insurance policy.

Managing personal affairs. If an individual is no longer able to manage his or her personal affairs, someone else will need to step in and take over. In planning for this possibility, three key documents should be considered:

Planning for health care and incapacity in retirement involves answering a number of complex questions. The guidance of trained professionals in insurance and medical benefits, as well as the counsel of an estate planning attorney, can be invaluable in designing and implementing an effective health care plan.

Q: I'm hearing conflicting information relative to the taxability of municipal bonds. Are they free from federal income taxes, state income taxes, or both?

A: Municipal bonds are debt instruments issued by states, counties, cities, and local government authorities such as a school or water district. The income from municipal bonds is typically exempt from federal income tax. Generally, municipal bond interest is also exempt from state and local income taxes, but only if the bondholder resides in the same jurisdiction where the bond was issued. Keep in mind that income from municipal bonds may be subject to the alternative minimum tax as well as potential capital gains taxes if the bonds are sold at a profit.

Joel M. Blau, CFP, (top) is president and Ronald J. Paprocki, JD, CFP, CHBC, is chief executive officer of MEDIQUS Asset Advisors, Inc. in Chicago. They can be reached at 800-883-8555 or

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