Retirement Healthcare Costs – USA TODAY Blueprint

Key Point

  • The average couple could need $315,000 to cover medical expenses in retirement.
  • Medicare can help cover medical costs in retirement, but it can’t cover everything.
  • Always monitor your retirement plan and adjust as needed.

Retirement: A side of life that people dream about. But that vision of forever piña coladas on the beach is fading, or at least delayed, as the prices of daily necessities steadily rise.

Health care is one of the necessities for retirees. According to the Fidelity Retiree Health Care Cost Estimate, her average 65-year-old retiree couple will need about $315,000 to cover medical costs in retirement. This does not include housing, bills, food or other expenses. So you can see why this topic can cause some serious sticker shock.

However, there are ways to plan ahead and reduce these expenses. Careful financial planning, access to Medicare benefits, and consideration of other health care options can help protect your retirement savings and peace of mind.

Rising medical costs have become a major problem

For many Americans, saving hundreds of thousands of dollars for retirement is not a luxury. it’s a must.

As if saving for retirement wasn’t hard enough, the prices of consumer goods and services now exceed health care. Historically it was the other way around. But that doesn’t change the fact that “health insurance and various medical expenses are expected to increase dramatically in retirement,” says Lyle Solomon, an attorney at Oakview Law Group.

According to the Centers for Medicare and Medicaid Services, health care costs are expected to grow by an average of 5.1% annually, reaching $6.8 trillion by 2030.

According to Fidelity Benefits Consulting, here’s the cost breakdown for the average American retiree couple:

  • 17%: Generic, branded and specialty drugs.
  • 39%: Medicare Part B and D premiums (doctor visits and prescription drug coverage).
  • 44%: Other medical expenses (co-pays, coinsurance, deductibles for doctor’s and hospital visits, etc.).

“These costs are based on the assumption that the couple is eligible for Original Medicare (Medicare Parts A and B) and does not have an employer-sponsored retiree health care plan,” Solomon says. “She may have less than $300,000 invested, but she can spend more.”

5 Steps to Reducing Health Care Costs in Retirement

Dealing with high medical bills in retirement requires preparation and discipline. A financial expert savvy with medical bills advises taking the following five steps to cover medical bills.

1. Know your cost targets

The first task for retirees and those planning to retire is to know what they are facing in terms of costs.

Basically, there are three areas of medical costs that need to be covered: medical premiums, out-of-pocket expenses, and long-term care.

  1. premium: Premiums are the amount you pay each month for coverage and are a major component of your medical expenses in retirement. By the way, Medicare Part A premiums are zero, while Part B premiums vary based on your income.
  2. Out-of-pocket costs: This is the total amount medical consumers pay themselves. Your insurance plan may include an annual out-of-pocket limit for covered medical services. However, you will be responsible for any costs not covered.
  3. Long-term care: Long-term care can make up a large portion of your overall retirement health care costs (and it’s important to note that the $315,000 figure above doesn’t include long-term care). This type of care includes homestay and medically-accompanied home care. According to, the annual cost of a private nursing home room in 2023 is $108,405. If you don’t plan for these expenses, your retirement spending plans can easily go awry.

People who retire before reaching Medicare eligibility (most often age 65) often worry about their health insurance premiums.

Jay Zigmont, a certified financial planner and founder of ChildFree Wealth, a Mississippi-based financial planning firm, said: “Is choosing a lower-premium plan effectively keep you healthy? You’re betting on ,” he said. “When insurance premiums are lower, copayments and limits are also higher.”

The challenge is that while a serious medical event such as a stroke or heart attack can easily result in a six-figure bill, cancer costs even more.

Health insurance protects you against covered costs and limits your out-of-pocket costs. But it becomes difficult when you need professional care that is not covered by insurance.

“You need flexibility and the ability to provide the best possible care when your health is at risk,” says Zigmont.

In that regard, many retirees’ plans seem to have fallen short. For example, retirees are often surprised that Medicare and most health insurance plans do not cover long-term care such as skilled nursing homes. As such, these costs can take an unexpected toll on a retiree’s savings fund.

Cost of long-term care

Keep in mind these are today’s numbers based on data from and

As inflation progresses, that number rises even further.

2. Know about Medicare

Medicare can play a big role in retirement and should be well understood by future beneficiaries.

“The financial role Medicare plays in retirement depends on which part of Medicare you enroll in,” says Lindsey Marzone, a Medicare expert at, a plan comparison platform.

Part A is free if you pay 40 quarters or 10 years of Medicare taxes.

However, there is a caveat. Part A covers only hospitalization, skilled nursing home care, hospice care, and some home care. If you want other coverage, you must enroll in Part B. The monthly premium for Part B depends on your income.

Medicare Part B Premiums for 2023

Both Part A and Part B have deductibles and coinsurance.

Other options, such as Medigap and Medicare Advantage plans, can help fill gaps in coverage. Medigap and Medicare Advantage plans are offered by private health insurance companies and can help pay for some of your medical bills. Medigap must be purchased and paid for by yourself.

Beneficiaries can enroll in Medigap or Medicare Advantage to supplement their original Medicare (Part A and Part B) coverage.

Medigap offers a more predictable out-of-pocket cost, but a monthly premium. Medicare Advantage monthly premiums can be low or even $0.

However, it is a pay-as-you-go plan. According to Marzone, you can expect to incur high out-of-pocket costs and network and coverage restrictions with this benefit.

In addition, Medicare Advantage plans often come with prescription drug coverage.

If you enroll in Medigap, you must be enrolled in a standalone Part D prescription drug plan.

The cost of Medigap depends on the policy you choose and the state fee structure.

Medicare plan overview

3. Know your best coverage gap options

In addition to options such as Medigap and Medicare Advantage, you may also consider other private insurance coverage. However, private insurance is generally more expensive than Medicare, especially when it comes to out-of-pocket costs.

Comparing Private Insurance and Medicare Deductibles

If you have a reasonable yearly medical bill, your out-of-pocket costs may be higher with a private insurance plan than with a Medicare plan (even when combined).

Still, you should plan for both anticipated medical expenses and long-term care that most regular health insurance plans do not cover. Medicare also doesn’t cover long-term care or custodial care unless medical care is needed.

Therefore, it is a good idea to consider long-term care insurance in addition to health insurance. It is worth noting that some life insurance policies provide a living benefit and that the death benefit may cover long-term care costs while you are alive.

4. Take advantage of tax-exempt medical savings accounts

If you currently have a High Deductible Health Plan (HDHP), you may be eligible for a Health Savings Account (HSA).

HSA can help future retirees with post-retirement health care costs by saving pre-tax dollars that can be enhanced by employer contributions.

HSA is good because it is triple tax exempt.

You will not be taxed on what you put in. As long as you spend that money on health care, that money will grow and come out tax-free.

Other health savings options for people without HDHP include Flexible Spending Accounts (FSAs) and Health Reimbursement Agreements (HRAs).

However, FSA and HRA funds typically remain with your employer when you retire, so they do not provide post-retirement assistance. However, some employers offer his HRA for retirees so that the funds in the account can be used to pay for medical expenses after retirement.

5. Get regular checkups to prevent health problems

You cannot control everything about your health. However, you can see where you stand and make changes based on that information.

Scheduling annual checkups, participating in disease screenings, and maintaining a healthy lifestyle can help you understand your health risks, make targeted improvements, and avoid illness. It’s a great way to help

example: If you can avoid developing chronic diseases by making lifestyle changes, you may be able to avoid the costs associated with diagnoses such as prescriptions, treatments, and doctor visits.

In other words, a focus on prevention and early detection increases the chances of staying healthy longer and reduces long-term health care costs, not to mention the impact on quality of life. Therefore, it is well worth talking to your doctor about your age-related health conditions and following your doctor’s advice if you have problems.

Medical costs for retirees can be daunting. But planning knowledge combined with staying healthy will set you up for the golden years with confidence. That way, you can focus on things like enjoying your retirement life.

Frequently Asked Questions (FAQ)

Average medical costs after retirement depend on several factors, including overall health, location, and insurance coverage.

Retired couples, averaging 65 years old, will need about $315,000 in savings to cover medical expenses in retirement, according to Fidelity. It is important to factor these costs into your retirement budget so that you are financially prepared for medical expenses.

Saving money on health care costs for retirement is a major concern for many.

One way is to look at various health care plans to find the most affordable option that meets your needs. This may include consideration of Medicare Advantage Plans and other additional insurance policies. Taking care of your health through exercise and a balanced diet can also help reduce health care costs in the long run. You can also save money by researching prescription drug prices and choosing generics and low-cost alternatives.

lastly, financial adviser Having a comprehensive retirement plan that includes medical expenses can help you better prepare for unexpected expenses.

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