Don’t Let Health Care Costs Derail Your Retirement

Posted on Oct 10, 2023

After housing and food, health care is one of the largest expenses you can expect in retirement. According to Fidelity Investments, a 65-year-old retiring in 2023 can expect to spend $157,500 - or $315,000 per couple - in health care and medical expenses throughout retirement years, beyond what Medicare covers.[1] Other sources estimate up to $1 million per couple, depending on lifespan, retirement location, and health conditions. Besides the expense, navigating the healthcare system and Medicare can be complicated. It’s important to plan ahead and become as educated as possible about your options.

One common misconception is that Medicare is free. While most people rely on Medicare coverage once they retire, they must still plan to pay premiums, deductibles, and co-pays. Medicare Part A (hospital insurance) is free for most retirees, but Part B, medical insurance, is not. In 2023, Medicare Part B premiums start at $164.90 per person per month but can cost more depending on your income. With traditional Medicare, there are also costs for Part D, prescription drug coverage, and for a supplemental Medigap plan, if selected. You can expect to easily spend $500 or more per person per month for traditional Medicare, Part D coverage, and Medigap, along with other possible co-pays.

Upfront costs are the reason many people choose Medicare Advantage plans offered through private companies, which combine Medicare Parts A, B, and sometimes D in one plan, and may offer vision, dental, hearing, and other benefits. However, in general, Medicare Advantage plans do not offer the same level of choice of providers as traditional Medicare, and out-of-pocket costs if you get sick can be significant. Long-term nursing home care, which is not covered by Medicare Advantage or traditional Medicare, is another possible expense people often overlook.

Even if retirement is still ten or twenty years away, it’s important to start planning as early as possible for healthcare costs. Talking to a local Medicare agent or broker near you is a great (and free!) way to prepare. Medicare.gov and SHIPhelp.org are two other great resources that provide detailed information on Medicare plans and other options. 

This material is provided for informational purposes only, and is not intended as authoritative guidance, legal advice, or assurance of compliance with state and federal regulations.

[1] https://newsroom.fidelity.com/pressreleases/fidelity--releases-2023-retiree-health-care-cost-estimate--for-the-first-time-in-nearly-a-decade--re/s/b826bf3a-29dc-477c-ad65-3ede88606d1c