Top Retirement Healthcare Costs

Top Retirement Healthcare Costs to Consider

Updated on Oct 15 2019

Healthcare is one of the largest expenses in retirement in America today, but diligent retirement planning can help you prepare so you can have financial peace of mind in your golden years.

A couple who retired in 2017 can expect to spend an average of $275,000 for health care costs throughout retirement, according to recent data from Fidelity Investments. That figure will only continue to rise as the years pass. Even though health care will remain expensive, there are certain measures you can take to reduce what you spend each year.

Retirement Healthcare Cost Education

Retirement can be tricky as there are many variables. For example, exorbitant healthcare expenses can be a real surprise for many Americans. As people age it is usually inevitable that healthcare challenges surface; which is why it’s important to be armed with the knowledge and financial planning strategy you need to prepare you for unexpected retirement healthcare costs.

Here are three health care costs that can affect retirees.


There is a misconception that once you reach Medicare eligibility, there are no more out-of-pocket health care costs, but unfortunately that is not the case. Many Americans believe that you automatically “go on Medicare” once you reach age 65, which is not true. In fact, there are at least 18 different Medicare options, so you need to consider your individual needs when deciding which plan or plan combination is right for you:

  • Medicare Part A
  • Medicare Part B
  • Medicare Part D
  • Medicare Advantage
  • Medicare supplement plans
  • Employer retirement plans also offer benefits and you can choose various combinations, depending on your needs.

Many 65-year-old Medicare-eligible Americans don’t know how to choose from all the options, so they decide to stay on their workplace plan. While this may seem more simple, it can actually be a much more expensive option with more restrictions on coverage. For this reason, finding the right Medicare strategy is key to saving money in retirement.

One popular approach is combining Medicare Parts A and B, plus a Medicare supplement and Medicare Part D for prescriptions.

Another popular approach involves Medicare Advantage. Operated by private carriers, Medicare Advantage plans typically cost less than Medicare supplements and often include other benefits, like dental and vision coverage. However, these plans often have cost-sharing, co-pays and physician networks.

An informed financial advisor can help you determine which Medicare plan and coverage might work well for your retirement.

Long-term Care

Long-term care can cost a family upwards of $6,000 a month, depending on the care and location the care is needed. It’s very important you take measures to save for this care and do your due diligence to inform your family of what care option is right for you (whether it’s in-home, assisted living or continuing care). If you find a place ahead of time you may even be able to take advantage of special rates.

Consider this: The estimated $275,000 figure discussed earlier in the article includes Medicare premiums, co-payments, deductibles and out-of-pocket expenses, but it does not include nursing home or long-term care costs.

When planning for health care in retirement, it is important to include the possibility of these needs into your long-term plan. Some financial advisors can help you forecast retirement health care expenses so you can build them into financial planning strategies.

Health Savings Accounts

Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) can save you taxable income. You can be proactive and plan ahead for health care in retirement if you have a qualified high-deductible health plan and open a Health Savings Account.

Here are a few ways HSAs and FSAs can help you save healthcare costs in retirement:

  • You can contribute to an HSA tax-free and use the funds for medical expenses.
  • Unused funds roll over every year, and surplus funds can be invested.
  • After age 65, you can withdraw the funds and pay only income taxes, just like an IRA; or you can continue to use the funds for medical expenses tax-free.

Individuals can contribute $3,450 to these accounts and families can contribute $6,900. consumers 55 years and older can contribute an additional $1,000 per year.

A financial advisor or long-term health insurance provider can help you determine what makes sense for your unique situation.

Planning Ahead to Alleviate Retirement Healthcare Costs

Medicare does not cover everything, so planning ahead for health care expenses is a crucial part of a comprehensive retirement strategy. Cut back on retirement healthcare costs by planning ahead; whether it’s by yourself or with the help of a financial advisor.

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