WHY WE WROTE THIS GUIDE.

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2 WHY WE WROTE THIS GUIDE. Healthcare costs can ruin retirement dreams if you haven t planned for them. This guide is designed to help investors like you avoid sticker shock when it comes to paying for health care in retirement. 47% of Americans cite health care as their greatest economic concern.1 Medical bills are the No. 1 cause of bankruptcy in the United States.2 For older Americans, healthcare costs now represent the second-largest expense, behind housing.3 In this guide, we will outline the basics of individual health coverage and Medicare and show you what to consider when making your healthcare selections. More importantly, this guide will help you manage healthcare costs in retirement by planning for these expenses now as part of your overall retirement savings goal. Meet the People Behind the Guide 3 Factor Healthcare Costs Into Your Retirement Dreams 4 Consider Individual Health Insurance Before Retiring Early 5 Learn the As, Bs and Ds of Medicare 7 Pay Attention to What Medicare Does Not Cover 9 Cover the Gap in Medicare 10 Get the Retirement Conversation Started 13 References and Disclaimers 14 >> Learn more at MutualFundStore.com

3 HI, WE RE THE MUTUAL FUND STORE. We ve been helping folks like you since Our investment advisors provide unbiased, fee-based advice and asset management to more than 37,000 clients in more than 120 offices nationwide.4 Our goal is to help put you on the path to a successful retirement. No sales pitch. No industry mumbo jumbo. No kidding. It s just you, us and a back-and-forth dialogue about your goals. HERE S WHAT YOU CAN EXPECT FROM US. A Registered Investment Adviser who offers unbiased advice, manages your account and always looks after your best interests. An investment plan that reflects your personal situation and retirement goals. A ccess to research and in-depth analysis from the Research Center, including our Nobel Prize-winning advisory board member, Tom Sargent. O ngoing communication so you stay informed, and we learn about changes to your goals and life events that might affect your needs. Now, let s continue on with the 5 Ways to Manage Healthcare Costs in Retirement. After reviewing this guide, reach out to us. We have even more ways we can help. GET A RETIREMENT PLAN Click here to get started Or call us today at (800)

4 #1 FACTOR HEALTHCARE COSTS INTO YOUR RETIREMENT DREAMS Retirement is a life phase rooted in the American psyche something we work toward our whole lives. After decades of the daily grind on the job, when retirement rolls around, we want to be able to relax and do what we ve always dreamed of doing be it traveling the world, taking up new hobbies or simply enjoying time with family. When we dream about retirement, we don t typically envision those golden years dominated by steep medical bills and financial stress. Yet, whether you realize it or not, medical care can consume a large portion of your retirement budget. According to the Employee Benefit Research Institute (EBRI), Medicare will only cover about 60% of an individual s medical expenses. This means a 65-year-old couple with prescription-drug expenses at the midpoint of their peers will need $241,000 in savings to have a 90% chance of covering their healthcare expenses.5 A single male will need $116,000 and a single female, thanks to her longer life expectancy, will need $131,000. As illustrated in the chart below, those with higher prescription-drug costs throughout retirement than 75% (75th percentile) or 90% (90th percentile) of their peers will need to have amassed even greater savings. $300,000 $250,000 $200,000 Married Couples $150,000 Median Expenses 75th Percentile $156,000 $176,000 $326,000 $129,000 $146,000 $270,000 $116,000 $131,000 $50,000 Women $241,000 $100,000 Men 90th Percentile To make matters worse, EBRI says the percentage of expenses covered by Medicare could decrease in the future. With the retiree share of healthcare costs rising, it s more important than ever to plan for these expenses in retirement. Key takeaway If you are planning for or approaching retirement, be sure you understand the impact of healthcare expenses on your retirement strategy. Advisors at The Mutual Fund Store have the resources necessary to evaluate your current retirement strategy and show you how it could be affected by healthcare costs. They can develop a plan to help you afford future medical expenses and help you achieve the retirement you ve been dreaming about. 4

5 #2 CONSIDER INDIVIDUAL HEALTH INSURANCE BEFORE RETIRING EARLY In the past, most early retirees (those who retire before age 65) could count on their employer to provide healthcare benefits during the early years of retirement until Medicare kicked in at age 65. However, times have changed and few companies offer health insurance after you retire. This may create a serious gap in coverage, because Medicare benefits do not start until age 65. Therefore you may need to buy individual health insurance in the interim. Previously, choosing the right individual health insurance coverage was complicated it was nearly impossible to make sideby-side comparisons due to so many variations among different insurance plans. But that is no longer the case. The Patient Protection and Affordable Care Act has standardized the coverage provided by plans in the individual market. All individual health insurance plans must now be categorized into one of four standard levels of coverage: Bronze, Silver, Gold, or Platinum (a fifth category, referred to as catastrophic coverage, may also be available in your state). Platinum Gold Silver Bronze Your Monthly Premium Cost $$$$ $$$ $$ $ Cost When You Receive Care $ $$ $$$ $$$$ Average % of Expenses Paid by Health Plan 90% 80% 70% 60% Average % of Expenses Paid by Individual 10% 20% 30% 40% Plan to use a lot of health care Want to save on monthly premiums while keeping out-of-pocket costs low Need to balance your monthly premiums with your out-of-pocket costs Don t plan to need a lot of healthcare services Good Option if You... As illustrated in the chart above, Platinum plans have the highest monthly premiums but the lowest costs for care, while Bronze plans have the lowest monthly premiums but the highest costs for care. Gold and Silver plans fall somewhere in between. 5

6 #2 CONSIDER INDIVIDUAL HEALTH INSURANCE BEFORE RETIRING EARLY In order to find the individual health insurance plan that best meets your needs, you ll need to answer the following questions: Are your doctor and hospital in the plan? When selecting a health insurance plan, it is important to verify your preferred physicians and hospitals are in that network. Also ask how much you will be paying per doctor visit, because different networks have different pricing discounts for each medical provider. What is your healthcare risk tolerance? Do you prefer to pay higher premiums for lower out-of-pocket expenses (less risky), or do you prefer to pay lower premiums in exchange for potentially higher out-of-pocket expenses (more risky)? Or are you somewhere in the middle? How important is freedom of choice? Healthcare plans come in two primary types, Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). An HMO generally has lower costs but is more restrictive. A PPO usually is more expensive but generally allows for greater choice in doctors, specialists and hospitals. Do you qualify for subsidies? If you are married and your Modified Adjusted Gross Income (used to determine your eligibility for various federal tax benefits) was less than $62,920 in 2014, or if you are single and your 2014 Modified Adjusted Gross Income was less than $46,680, you may qualify for premium subsidies. 6 You can buy a plan outside the Health Insurance Marketplace and still meet the healthcare law s coverage requirements. But if you do buy outside the Marketplace, you won t be eligible for federal tax credits on premiums or other savings based on your income. Key takeaway Make sure your retirement strategy encompasses health insurance premiums if you plan to retire before the age of 65 well in advance, create a retirement budget that accounts for such out-of-pocket expenses. Since you will not be covered by Medicare until age 65, you may need to buy interim health insurance through the individual marketplace. For more information, please visit 6

7 #3 LEARN THE As, Bs AND Ds OF MEDICARE Medicare is a federally administered social insurance program that guarantees access to health insurance for most Americans aged 65 and older. It also is available to certain individuals younger than age 65, including younger disabled workers and people with end-stage renal disease and ALS. There are three basic Medicare plans, commonly referred to as Part A, Part B and Part D: MEDICARE PART A (HOSPITAL INSURANCE) Helps cover inpatient care in hospitals. Helps cover skilled nursing facility, hospice and home health care. Part A (Hospital Insurance) Things to Consider: Most people don t pay a Part A premium because they or their spouse paid Medicare taxes while working. There are, however, additional deductible and coinsurance costs that are based on the length of your hospital stay. If you aren t eligible for premium-free Part A, you can buy coverage at a cost of up to $407 each month. MEDICARE PART B (MEDICAL INSURANCE) Helps cover doctors services, hospital outpatient care, ambulance services and some preventive services. Also covers diagnostic tests and durable medical equipment (such as wheelchairs and walkers) considered medically necessary. Part B (Medical Insurance) Things to Consider: The standard monthly premium for Medicare Part B in 2015 is $ per person. However, if your Modified Adjusted Gross Income is above a certain threshold amount, you will pay a higher monthly premium.7 WHAT ARE MEDICARE LIFETIME If you don t sign up for Part B when first eligible, you may have to pay a higher monthly premium as a latereserve DAYS? enrollment penalty unless you meet certain conditions that qualify you for a Special Enrollment Period In addition to the monthly premium, there is an annual deductible of $147 per year and a 20% copay for most doctor services, outpatient therapy and durable medical equipment. There is no out-of-pocket maximum for Part B. (e.g. you are covered by a group health plan based on your, or your spouse s, current employment). 7

8 #3 LEARN THE AS, BS AND DS OF MEDICARE MEDICARE PART D (PRESCRIPTION DRUG COVERAGE) A prescription-drug option run by Medicare-approved private insurance companies. Helps cover the cost of prescription drugs. May help lower your prescription drug costs and help protect against higher costs in the future. Part D (Prescription Drug Coverage) Things to Consider: With Medicare Part D, you choose an insurer and then choose a plan. Similar to Medicare Parts A and B, you are required to enroll for coverage. There is a monthly premium that varies based on the Part D plan you select. This monthly premium also can vary each year. The average national monthly premium in 2015 is $33.13, plus you typically pay an initial deductible each year (the average is $310). Like Part B, if your Modified Adjusted Gross Income is above a certain threshold amount, you will pay a higher monthly premium. Since different plans cover different drugs, it is essential you compare plans to decide which gives you the best coverage for the medications you re on. You want to make sure YOUR drugs are covered. An online resource like HealthPocket.com can help you find the right option for your needs. Projected Annual Medicare Costs for an Individual: Part B and Part D Premiums8 Year Age Part B Part D Annual B+D $1,725 $871 $2, $3,238 $1,636 $4, $6,078 $3,070 $9,148 Key takeaway Trying to understand and then keep track of the many pieces of the Medicare puzzle can be daunting. However, not doing so can result in draining your retirement savings unnecessarily. You must take into consideration the various premiums and out-of-pocket expenses when creating your retirement budget. Review your medical needs, including prescription drugs, with your doctor as you near retirement. Familiarize yourself with Medicare plans and options, and work with an advisor from The Mutual Fund Store to include healthcare costs in your retirement strategy. 8

9 #4 PAY ATTENTION TO WHAT MEDICARE DOES NOT COVER Medicare generally helps cover most of your important healthcare costs, like surgeries, doctors appointments and maintenance or well-visit services. However, Medicare doesn t cover everything. If you need certain services that Medicare doesn t cover, you ll have to pay for them yourself unless you have other insurance. Remember, of course, that even if Medicare does cover a service or item, you generally still have to pay deductibles, coinsurance and copayments. Here are some of the items and services Medicare doesn t cover: Long-term care (also called custodial care) Most dental care Eye examinations related to prescription eyeglasses Dentures Cosmetic surgery Acupuncture Hearing aids and hearing-aid fitting exams Routine foot care Medical care while traveling outside of the United States Always talk to your doctor or other care provider to verify whether Medicare covers whatever service or supply is being recommended. You can also check whether a test, item or service is covered using a search tool available on the Medicare website ( Lastly, keep in mind there are NO out-of-pocket limits for most Medicare-covered services. This is why Medicare suggests you consider purchasing supplemental insurance that builds on the foundation of Original Medicare. Key takeaway Understand what is covered by Medicare and what is not. You can get personalized healthinsurance counseling at no cost to you from your local State Health Insurance Assistance Program (SHIP). SHIPs provide free counseling and assistance via telephone and face-toface interactive sessions, public education presentations and programs, and media activities. For a full listing of SHIP resources available in your state, visit 9

10 #5 COVER THE GAP IN MEDICARE When looking at options for bridging the gap in Medicare, you have two primary options: add Medicare Supplement (Medigap) to Original Medicare, or replace Original Medicare with Medicare Advantage (Part C). Medicare Advantage Plan (Part C) Original Medicare + Medigap + Part D OR Review the features in each row of this table and place a checkmark next to the one that is more important to you. The column with the most checkmarks is likely the best option based on your current needs. For specifics on what each part of Medicare covers, visit Original Medicare + Medigap Medicare Advantage Prefer to pay higher premiums with lower out-of-pocket costs Prefer to pay lower premiums with higher out-of-pocket costs Seeking significant additional coverage to Medicare Seeking coverage similar to Medicare Use a larger network of doctors Use a smaller network of doctors See a doctor frequently See a doctor infrequently Travel outside of the United States frequently Travel outside of the United States infrequently Not on a limited budget On a limited budget = Total number of checks Total number of checks = 10

11 #5 COVER THE GAP IN MEDICARE MEDIGAP Medigap, sometimes referred to as Medicare Supplement, is an insurance plan sold by private companies to help pay for some of the costs Original Medicare doesn t cover, such as copayments, coinsurance and deductibles. Many retirees purchase Medigap policies because they want more predictable health coverage. Medigap is optional, but you must have Medicare Parts A and B to purchase it. Ten standardized Medigap plans currently are available through dozens of insurance companies. These policies are identified by the letters A through N, each with specific benefits, allowing you to choose a plan most appropriate to your needs. All policies include coverage for certain core benefits, such as copays for Part B services and extended hospital stays. Some policies provide additional benefits, as you can see from the chart below. Generally, the greater the coverage, the higher the premium. Because every Medigap policy must comply with federal and state laws, each policy will offer the same basic benefits within each standardized category, no matter which insurance company sells it. Medicare Supplement Insurance Plans A B C D F1 G K2 L2 M N Basic Benefits* 50% 75% Part B Coinsurance 50% 75% Skilled Nursing Copay3 50% 75% Part A Deductible 50% 75% 50% Part B Deductible Part B Excess 100% 100% Foreign Travel Emergency Preventive Care Part B Coinsurance *Medigap can only be used by people enrolled in ordinary Medicare. 1 Plan F has a high-deductible or high-premium option. 2 Out-of-pocket limit: K - $4,660 and L $2,330. 3Pays 100% of Part B coinsurance, except for certain copayments. Things to Consider: Medigap policies generally do not cover long-term care, vision or dental care, hearing aids, eyeglasses or private-duty nursing. You will pay a monthly premium to the private insurance company for your Medigap policy in addition to the monthly Part B premium you pay to Medicare. Medigap policies generally are more expensive than Medicare Advantage Plans (Part C) and rates will go up as you get older. Insurers must sell a policy to everyone who applies within six months of the applicant s initial Medicare eligibility. Companies cannot deny coverage or charge more for pre-existing conditions during this window. After the initial six-month period, however, carriers can ask health-status questions and deny coverage. 11

12 #5 COVER THE GAP IN MEDICARE MEDICARE ADVANTAGE Medicare Advantage plans, sometimes called Part C or MA Plans, are offered by private companies approved by Medicare. If you join a Medicare Advantage plan, you still have Medicare. However, you ll get your Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance) coverage from the Medicare Advantage plan and not from Original Medicare. Medicare Advantage plans often operate as HMOs or PPOs, which require you to utilize doctors within their predefined networks. Medicare Advantage plans cover all Medicare services at a minimum and often provide extra coverage. For example, some Part C plans offer coverage for expenses such as dental and vision. Things to Consider: Medicare pays a fixed amount for your care each month to the companies offering Medicare Advantage plans. These companies must follow requirements set by Medicare. Each Medicare Advantage plan can charge different out-of-pocket costs and have different rules for obtaining services (like whether you need a referral to see a specialist, or if you are limited to providers that belong to the plan for non-emergency or non-urgent care). These rules can change each year. A Medicare Advantage plan typically includes prescription-drug coverage. If yours does not, you can join a Medicare Prescription Drug Plan. You cannot have prescription-drug coverage through both a Medicare Advantage plan and a Medicare Prescription Drug Plan (Part D), however. Be sure to know what s covered, because if you re in a Medicare Advantage plan with prescription-drug coverage and you join a Medicare Part D plan, you ll be unenrolled from your Medicare Advantage plan and returned to Original Medicare. Key takeaway While Medicare provides a solid foundation for your retiree health care, there are NO out-of-pocket limits for most Medicare-covered services. This is why Medicare suggests purchasing additional insurance to supplement Original Medicare. Look carefully at your options to find the one that is best suited to your needs and bottom line, and be sure to plan for these expenses now as part of your overall retirement savings goal. 12

13 GET THE RETIREMENT CONVERSATION STARTED Planning for retirement is complicated. When factoring in healthcare costs, it can seem even more overwhelming, so let us help you define your retirement goals and put you on the path to achieving them. We ll estimate the likelihood you ll reach your long-term goals based on your current strategy and determine what changes to your approach might help increase your probability of success. No matter your stage of life, an investment advisor with The Mutual Fund Store can help you design a retirement and investing strategy that includes healthcare expenses. The plan is free, with no obligation. How We Can Help Time to Retirement Several Years Two Years In or Less Retirement Familiarize you with individual healthcare plans Estimate your healthcare costs in retirement Design an overall retirement plan for you Incorporate healthcare costs into your plan Manage your plan to help you achieve your goals Explain the basics of Medicare Familiarize you with the Medicare enrollment process Help you avoid coverage delays and possible penalties To get help and a plan for retirement Click here to get started or call us today at (800)

14 REFERENCES AND DISCLAIMERS This information is provided by The Mutual Fund Store, and is for informational purposes only. The information is not intended to constitute investment advice or recommendation for any individual. This material should be regarded as educational information on healthcare costs and is not intended to provide specific healthcare advice. If you have questions regarding your particular situation, please contact your legal or tax advisor. [1] IMCA Research, Quarter 3, 2014 [2] [3] For Americans age 50 or above, Employee Benefit Research Institute Issue Brief. No. 368, 2012 [4] As of Dec. 31, 2014 [5] Amount of Savings Needed for Health Expenses for People Eligible for Medicare, Paul Fronstin, Ph.D., Dallas Salisbury and Jack VanDerhei, Ph.D., Employee Benefit Research Institute, 2014 (estimated percentage of costs covered by Medicare as of 2011; savings estimates calculated for those aged 65 in 2014) [6] Federal Poverty Level , [7] U.S. Social Security Administration, [8] Cost estimates determined by Jester Financial Technologies The Mutual Fund Store is a nationwide system of registered investment advisers, which include affiliated companies and independently owned and operated franchises. Individual Stores are SEC- or state-registered investment advisers. Each Store can offer investment advisory services to prospective and existing clients in the state where the Store is located, while a number of Stores may also offer advisory services in nearby or other states. The adviser may not transact business in states where it is not appropriately registered, excluded or exempted from registration. For the period ending Dec. 31, 2014, The Mutual Fund Store system collectively managed more than $9.5 billion for more than 37,000 clients and has more than 120 offices nationwide. The Research Center is The Mutual Fund Research Center, LLC. The Research Center is an SEC-registered investment adviser which provides asset allocation and mutual fund recommendations, as well as market and economic research to each Store in The Mutual Fund Store organization and their advisors. This includes the Store that provides you with advisory services. The Mutual Fund Store advisors provide independent, fee-based, investment advisory and asset management services, which include developing and implementing customized portfolios for clients based on their unique financial situation and ability to tolerate risk associated with investments in securities. Investing in securities, including mutual funds, involves risk including the risk of loss. Past performance is not a guarantee of future results. Diversification does not ensure any investment strategy will be protected from market risk. Investors should consider the investment objectives, risks, and expenses of a fund carefully before investing. Before investing in a mutual fund, request and review the fund s prospectus or consult with a professional fee-based financial advisor. For information on taxes, please consult a tax advisor. This report may contain references and links to other resources or websites that are owned and operated by someone other than The Mutual Fund Store. The Mutual Fund Store provides these resources solely as a convenience. The reference and appearance of the resource or website does not imply endorsement by The Mutual Fund Store nor is The Mutual Fund Store responsible for its content. While The Mutual Fund Store believes the information is accurate and reliable, we are not responsible for its accuracy. 14