Get Ready for These High Medical Costs in Retirement


Paying for medical care is a major consideration when transitioning into retirement. Some health related expenses are simple to predict and can be factored into your budget, such as paying insurance premiums. However, health care costs can also be unexpected, and paying the resulting bills can be challenging.

Some of the highest medical costs to expect in retirement include:

  • Insurance premiums.
  • Assisted living.
  • Nursing home care.
  • Home health assistance.
  • Dental expenses.
  • Vision costs.
  • Prescription drugs.

Here’s how to plan for medical costs in retirement.

Insurance Premiums

For most individuals, eligibility for Medicare starts at age 65. If you retire before then, you will need to decide how to pay for health costs until you turn 65. During that span, “your biggest expense will be health insurance premiums for private coverage,” says Michael Botta, co-founder of Sesame, a health care marketplace, based in New York City.

If your employer provided health insurance coverage during your working years, you might be able to keep your coverage through the company’s plan. The Consolidated Omnibus Budget Reconciliation Act is a law that allows workers and their families to continue their health benefits through a former employer’s group health insurance plan. Normally COBRA lasts for 18 or 36 months after leaving the workplace. However, COBRA coverage is often expensive, and companies with 20 or fewer employees may not need to follow COBRA guidelines. Other health coverage options include purchasing short-term insurance until you are eligible for Medicare or taking a part-time job that includes health insurance benefits.

Once you qualify for Medicare, you will still need to pay for premiums, deductibles and expenses that are not covered by the plan. Medicare Part A covers hospital care, Part B provides outpatient coverage and Part D includes prescription drug coverage. A Medigap plan can help cover out-of-pocket expenses related to Medicare. A Medicare Advantage plan, also called Medicare Part C, is an alternative to original Medicare with different prices, covered services and restrictions.

Home Health Assistance

If you have a health condition that needs monitoring, you might have to pay for home health care. This usually involves a professional caregiver who helps provide health care at your home. Home health care covers a large range of services, including injections, therapy and wound care.

If you opened and contributed to a health savings account during your working years, you will be able to use those funds in retirement. “HSAs are a great tool that creates a nest egg for retirees to pay for medical expenses,” says Jake Butcher, a wealth advisor at HCM Wealth Advisors in Cincinnati, Ohio. To be eligible for an HSA, you’ll need a high-deductible health plan.

You might also contract for services related to housekeeping, cleaning, running errands and other homemaker activities. Assistants can help cover personal care like dressing, grooming and eating. A home health aide has an annual median cost of $54,912, according to the 2020 Genworth cost of care survey.

Assisted Living

If you decide to move into an assisted living facility, the related expenses will typically be paid out of your own savings. “The older you get, the more health care and possibly long-term care will take out of your retirement and investment accounts,” says Michael Morgan, president of TBS Retirement Planning in Hurst, Texas. The national median cost of an assisted living facility was $51,600 in 2020, according to the Genworth survey. You might put your home up for sale when you move into an assisted living center, which can help offset the costs.

Nursing Home Care

A nursing home tends to provide higher levels of care than assisted living. You might transition from an assisted living center to a nursing home, or you may stay in a nursing home to recover from a surgery or hospital visit. A semi-private room in a skilled nursing facility cost an average of $93,075 in 2020, while a private room cost $105,850, Genworth found. You might pay for these stays with your own funds or through long-term care insurance. “There are many different long-term care plans to cover expenses,” Morgan says. “There are life insurance and annuity policies that have riders where you can apply the death benefit toward long-term care expenses.”

Dental and Vision Expenses

Regular dental visits fall outside the scope of basic Medicare plans. Dental costs “can add up as one ages, particularly spending on crowns, root canals, dentures and tooth replacements,” Botta says. Some Medicare Advantage plans include coverage for dental procedures.

Basic Medicare doesn’t cover routine eye exams, eyewear or contact lenses. However, Medicare will cover expenses related to some eye diseases and procedures. Some Medicare Advantage plans may provide assistance with routine vision care.

Prescription Drugs

You can purchase a Medicare Part D plan that will provide coverage for prescriptions. However, depending on the plan you select, some medications may have high out-of-pocket costs or not be covered. “Prescription drugs can have high sticker prices,” Botta says. Some sites like SingleCare and GoodRx offer coupons and discounts on prescriptions. Discount cards for prescriptions, such as America’s Pharmacy, Choice Drug Card, GoodRx Gold and ValpakRx, might provide additional ways to save.


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