Here’s a little quiz: When you become eligible for Medicare at age 65, you no longer have to worry about health insurance and medical care costs. Yes or No?

If you answered yes…you had better tune in to the next installment of our “Get Your Finances Ready for Retirement” series, on Monday, August 11. In it, reporter Joe Collum shows that health insurance and medical care costs are considerable even under Medicare--and these costs need to be provided for in retirement budgets.

Part of the reason is that Medicare is full of holes in its coverage. Eyeglasses, hearing aids, most nursing home care and dental care are excluded (and teeth don’t get better with age!). Many Medicare programs, including Parts A and B, require large premiums and deductibles. And even Medicare Part D, the highly-touted prescription drug benefit, requires that the person enrolled pick up a large share of initial drug costs.

That’s why having a “Medigap” supplemental insurance policy can be a good idea, even though it can be expensive. Joe shows how one retiree golfer had to undergo knee replacement surgery with a pricetag of about $100,000. Medicare picked up about 80% of that--still leaving a bill of around $20,000. Luckily, this golfer had a Medigap policy, and it paid all but $69!

Of course, that’s a best-case-scenario--not every Medigap policy will pay off to this extent, and not every retiree will be able to obtain or afford a policy like that. So for many retirees, medical costs will still be a major concern.

Another threat to retiree finances is something far less obvious--inflation. (No, I’m not talking about the rise in gasoline or food prices over the last few months). As reporter Connie Hicks will show in her report on Monday, August 25, even relatively low inflation can take a major toll in terms of a retiree’s purchasing power over time.

For example, over the past decade (1998-2007), inflation averaged just 2.7% a year. If inflation continues at that rate, then the tank of gas that costs $50 today would cost more than $65 in 2018 and more than $85 in 2028. In the old days, that wouldn’t have mattered much, because pensions were generally indexed to account for inflation. But because few retirees now collect pensions, trying to keep pace with the rising cost of living is getting tougher--especially as increasing longevity makes retirements last longer.

What can you do to make your retirement savings grow faster than inflation? Connie will provide some ideas. But with inflation now resurgent (running at an annual rate of 5.5% in the first half of 2008), one almost-certain way to lose ground is to sit back and let your retirement money sit in a CD or a Money Market account that’s earning just 2% a year (before taxes).

The bottom line: your retirement finances are constantly being chipped away….by inflation, medical costs and other challenges. To find out how to counter them, be sure to tune into the next two installments of “Get Your Finances Ready for Retirement” on August 11 and 25.