Why Do Medicare Supplements Increase Each Year?
Today I’m answering a question from a reader. The reader writes:
“Why does Medicare Supplement insurance increase as you get older?”
That’s a great question. It is primarily because:
1. Every year you reach a higher age bracket.
2. And healthcare costs increase each year, so the insurance company increases premiums to keep up with it.
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Most Medicare Supplements are priced based on the Attained Age pricing model. This means your premium is based on your attained age. Since you attain a new age each year, your premium will typically increase each year as you enter that higher age bracket.
Some Medicare Supplements are priced based on a Community-Rated pricing model. Everyone pays the same rate regardless of age. The only increases an insured experiences under this method is when the company raises everyone’s rate.
With Attained Age pricing you will typically pay less when you are younger at age 65, and you will pay more at an older age like 85. This is because as you attain higher ages, your rate goes up.
With Community –Rated pricing, you will typically pay more at the younger age of 65. This is because all the insureds, regardless of age, are paying the same rate under this method. But the older ages, such as 85, will typically pay less under this pricing method (compared to the Attained Age pricing method).
The takeaway for all of this is that you need to plan for higher healthcare costs in retirement. You also need to at least be factoring in at least a 3% inflation rate on expenses when doing your retirement planning.
Since healthcare costs will likely keep going up in the future, it is important that you don’t make any other mistakes with your retirement money. One important issues you will likely face in retirement is whether or not to buy an annuity.
If you are thinking about purchasing an annuity (or if you currently have an annuity) be sure to download the free eBook, “How To Avoid Annuity Traps.” It will help you avoid some costly mistakes.
Just visit: http://retirementplanningmadeeasy.com/annuity-traps to instantly download your copy today.
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