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Managing Healthcare Costs in Retirement

Published August 1, 2017
Unforeseen healthcare costs are commonly overlooked in retirement planning. Here’s how you can anticipate these expenses.
  • Healthy individuals still incur inevitable healthcare costs associated with aging
  • It’s important to evaluate your lifestyle habits and consider your family history
  • Be sure to review your current healthcare plan and benefits

One major area of expenses that cannot be overlooked in your retirement planning is health care. However, a common misconception is that if you’re a healthy individual — you eat well, you don’t smoke, you exercise — you don’t need to consider health care costs as much as your less healthy counterparts.

Quite the opposite, actually.

On average, a healthy individual will incur greater healthcare costs over his or her retirement, as he/she will likely lead a longer life, and with aging comes inevitable healthcare costs.

So what can the healthy individual who’s doing everything right do to navigate future healthcare costs? Below we’ve outlined a few tips for you to incorporate into your retirement plan.

  • Try to consider what hypothetical complications you may run into with your health in the future. Consider family history, diet, exercise level, and habits. Don’t get caught up solely in high-cost disease treatment. Smaller ticket items such as hearing aids or physical therapy add up fast.
  • Take a look at you health coverage and retiree health benefits before you need them. Don’t worry if you don’t have a workplace plan, or if you lose your plan upon retirement.
  • Don’t forget about Medicare – the federal health insurance program for people aged 65 and up, as well as certain disabled and sick younger people. Medicare has four parts:
    1. Hospital Insurance: Covers inpatient hospital care, care in a skilled nursing facility, hospice care, and certain home health care.
    2. Medical Insurance: Covers certain doctors’ services, medical supplies, preventive services, like vaccines, and outpatient care.
    3. Medicare Advantage Plans: A private company health plan that contracts with Medicare to provide your hospital and medical insurance, and often prescription drug coverage, too. This type of plan includes Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service Plans, Special Needs Plans, and Medicare Medical Savings Account Plans.
    4. Prescription Drug Coverage: A feature of Original Medicare, some Medicare Cost Plans, some Medicare Private-Fee-for-Service Plans, and Medicare Medical Savings Account Plans. Private companies and Medicare Advantage Plans typically offer similar coverage for prescription medications.
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Lauren Minches

Lauren Minches

Financial Planning Professional

Lauren is an actuary by training with expertise in retirement, finance, and risk. She writes about annuities to make them easier to understand and evaluate. Her goal is to help people create retirements with more time for living and less time thinking about money.

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