Preparing For the Cost of Healthcare in Retirement

July 12, 2019 Jonathan Nolan

Preparing For the Cost of Healthcare in Retirement

For many people, a mortgage payment is our largest monthly expense. So it might surprise you to learn that in retirement, that can change dramatically. In many cases, healthcare is the number one expense faced by retirees. And since your health can change at any time, so can your budget.

That’s why retirement planning should always account for the cost of healthcare, and the various risks associated with medical bills. According to the Center for Retirement Research at Boston College, the average retiree spends $4,300 annually on out-of-pocket healthcare costs. That’s because, contrary to common belief, Medicare does not cover everything you might need. You’re still subject to co-pays, deductibles, the cost of some prescriptions and equipment, and so on. And, that figure does not include the cost of long-term nursing care, which can cost several thousand per month. 

Are you surprised by these facts? Most people are, and that’s why it’s important to prepare for the cost of healthcare before retirement, rather than risking an unpleasant surprise later.

Your Medicare options. Medicare is actually divided into different parts, and it’s important to understand them and their coverage limits. Medicare Part A covers hospital bills, whereas Part B is used for doctor visits and preventive care. Most people won’t pay for Part A (assuming they worked and paid Medicare taxes for at least ten years) but they will be subject to a deductible for hospital services. Right now that deductible is $1,364 per benefit period (from the time you enter the hospital to 60 days afterward).

Part B currently charges a standard premium of $135 per month, although it can be higher for those with higher incomes. You will be subject to a deductible of $185 per year.

Neither of these Medicare plans cover prescription drugs, so you might wish to enroll in Part D for that (for a premium, of course).

Want it all? Medicare Part C, also known as a Medicare Advantage Plan, includes Parts A and B. Many plans also include Part D coverage. You will pay one monthly premium for an Advantage plan, that is typically higher than you’d pay for those plans separately, but these plans are designed to lower other out-of-pocket costs.

Dental and vision coverage. But wait! Medicare doesn’t pay for routine dental and vision care, so you will need to plan for those expenses, too. Everyone needs dental, of course, and even those with perfect vision find that their situation changes past age 65 or so.

Long-term care. Finally, because Medicare pays for only a very limited amount of long-term nursing care, you will be responsible for that expense should you ever need it. Long-term care insurance is one option, or you can establish a retirement budget that accommodates that monthly bill.

For more information on the different Medicare options available to you, please give us a call. We can help you run the numbers and decide which Medicare plan is a good fit for your budget.


We welcome you to contact us if you need assistance
or to get a policy quote.