Health Care Costs in Retirement

Having enough money to pay for medical expenses in retirement is an important component of your overall financial picture. Being aware of potential health care costs during retirement may allow you to better understand what you can pay for and what you can’t.

Health Care Expense Breakdown

A retired household over the age of 65 may face these three traditional types of health care expenses:

1. The premiums for Medicare Part B (which covers physician and outpatient services) and Part D (which covers drug-related expenses). Typically, Part B and Part D are taken out of a person’s Social Security check before it is mailed, so the premium cost is often overlooked by retirement-minded individuals.
2. Copayments related to Medicare-covered services that are not paid by Medicare Supplement Insurance plans (also known as “Medigap”) or other health insurance.
3. Costs associated with dental care, eyeglasses, and hearing aids – which are typically not covered by Medicare or other insurance programs.

Those hoping to retire before the Medicare-eligible age of 65 have an even greater motivation to understand their health costs, as they likely will pay more for health insurance during this period of time than at any other time of their life.  They are no longer covered by an employer and are not yet covered under Medicare. During these gap years, their options generally consist of one of the following:

1. COBRA benefits from their former employer plan
2. Coverage under a working spouse’s plan
3. Signing up for a high-deductible plan through the state-run exchanges
4. Buying individual coverage through a knowledgeable health insurance broker

It All Adds Up

According to a recent study a 65-year-old healthy couple (male living to age 87; female, age 89), can expect their lifetime health care expenses to add up to around $662,156 (HealthView Services, 2021).

While healthcare costs differ from person to person, it’s important to take them into account as you consider your overall spending in retirement, and to make sure you have a realistic expectation of the costs.

Prepared for the Future?

If you have questions about planning for health care related expenses in retirement, don’t hesitate to talk to your Johnson Bixby planner about options that may be right for you.