Health Care Planning

  • Are your healthcare costs in retirement currently part of your financial plan? 

  • Do you know when and how to enroll in Medicare? 

  • Do you understand the different Medicare Supplemental Insurance coverage options (Medigap vs. Medicare Advantage)

  • Do you know how much supplemental insurance coverage will cost you in retirement? 

  • Have you estimated your out-of-pocket medical expenses in retirement?

Things to Consider

People are living longer, meaning more time in retirement and higher healthcare costs. The sooner you begin to plan for your healthcare costs in retirement, the better chance you have of not derailing your financial plan. Unplanned healthcare costs in retirement will be a primary reason many people fail to meet their retirement goals and objectives. Healthcare costs now represent the second-largest retiree expense (behind housing) and are the number-one cause of bankruptcy in retirement.

What you need to know

Early retirees may need to consider individual health insurance

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. If you plan to retire early, you will need to know the basics of buying health insurance on the individual market.

Know the A’s, B’s, and D’s of Medicare

Medicare is a federally administered social insurance program that guarantees access to health insurance for most Americans aged 65 and older.

  1. Part A: hospital insurance — premium free for most
  2. Part B: medical insurance — $121.80/month/person (2016)
  3. Part D: prescription drug coverage — premiums vary by plan

Know your gap options

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.

You have two primary options to bridge the gap in Medicare:

What It Means

A 65-year-old healthy couple retiring this year, and covered by Medicare Parts B, D, and a supplemental insurance policy, will average lifetime retirement healthcare premium costs of $266,598. If you were to include their total health care (dental, vision, co-pays, and all out-of-pockets), their costs would be $394,954.4

The table below displays annual healthcare premium costs in five-year intervals for a 65-year-old couple retiring today with Medicare Parts B and D and a supplemental policy.

Cost projections for a 65-year-old couple4

Ensure healthcare costs are part of your financial plan regardless of age. Review your retirement plan regularly with an advisor and make adjustments as needed.

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1. National Health Expenditure Projections 2012-2022 — Centers for Medicare & Medicaid Services

2. The Henry J. Kaiser Family Foundation — Health Care Costs: A Primer, May 2012

3. Nerdwallet — NerdWallet Health Finds Medical Bankruptcy Accounts for Majority of Personal Bankruptcies, March 2014


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