Healthy, Happy, & Retired - Paying for Health Care in Retirement
Making the most of your retirement years begins with staying healthy. And part of staying healthy is managing health care costs. The good news is that with planning, covering health care costs is entirely doable. We can help you work those costs into your retirement budget, so you're ready to enjoy life. A healthy 65-year-old couple may spend: $662,156 on health care related costs throughout retirement and $208,000 on out-of-pocket expenses over their lifetime.
Breaking Down Medicare
Medicare is a medical insurance program offered by the federal government for individuals 65 years or older or disabled. It's made up of four different plans (called Parts) plus an extra coverage option called Medigap.
Medicare Part A
Medicare Part A helps cover the cost of inpatient medical care. It covers hospital stays, skilled nursing, home health care, and hospice care. The U.S. government provides it and it costs nothing for most people. The deductible is $1,556 per benefit period. You will pay for some or all hospital in-patient costs if you stay longer than 60 days.
Medicare Part B
Medicare Part B covers services like doctor visits, diagnostic costs, and outpatient hospital care. The U.S. government provides it and it starts at $135.50 per month depending on your income. The deductible is $223 per benefit period. There is a 20% copayment for some services.
Medicare Advantage helps cover hospital and medical services. You can choose Medicare Advantage in place of Parts A and B. This might cover prescription drugs. Private health insurance companies provide this. The cost and deductible vary by plan. There is also a copay for most services.
Medicare Part D
Medicare Part D covers generic and brand-name prescription drugs. Private health insurance companies provide this. The cost and deductible vary by plan and income level. If you signed up before 2020, you may pay some drug costs due to a coverage gap.
Medigap helps cover copayments and deductibles for Parts A and B-you cannot use it with Medicare Advantage. Private health insurance companies provide this. The cost and deductible vary by plan and location.
The Bottom Line
Medicare Parts A and B generally provide the lowest upfront costs. But they can also create the most coverage gaps. Medicare Parts A, B, D, and Medigap together have the highest upfront costs. However, they provide the fullest coverage with the least amount of gaps.
Ways to Pay for These Costs
If You are Still Working:
- A health care savings account may be an option. Check with your employer.
- Check into possible coverage through your employer or individually.
If You are About to Retire and You are not 65 Yet:
- See if your employer offers an early retiree insurance program.
- Consider extending your employer's health plan coverage using COBRA coverage. (It may cost extra, and there's usually a time limit.)
- Buy individual insurance. Explore and compare different options at healthcare.gov.
If You are Already Retired:
- If your spouse if still employed, see if you can join his or her employer-provided health care plan.
- If you are a veteran, see if you qualify for coverage through the Veterans Benefits Administration.
- If you are not 65 yet, consider purchasing individual insurance. Explore and compare different options at healthcare.gov.
At Any Time:
- Think about long-term care insurance. You can buy this insurance on your own, from your employer, or through another group you might belong to, like an alumni association or trade organization.
Click on the link below to check out Principal's article on health care in retirement!