Will Your Retirement Savings Cover Your Health Care Costs?

Health Care Costs

Health care costs are a wildcard for retirees and are only expected to rise due to an increase in life expectancy, a rise in the utilization of medical services, and rising prescription drug costs.

For those who had been covered by employer health care coverage while working, retirement may mean paying more for medical insurance, including Medicare Parts B and D and Medicare Supplement policies. Even with insurance, some expenses will have to be paid out-of-pocket. Additionally, chronic or acute illnesses might result in unexpected and significant out-of-pocket costs.

Let’s consider a scenario. Say a 70-year-old woman has serious foot problems. She learned that Medicare doesn’t cover routine podiatrist visits. Then, she had to have a major surgery only to learn that she must now pay a deductible and a 20% copay on the expenses. Unfortunately, this isn’t an uncommon situation for retirees to face. As you age, you can anticipate needing more health care and, thanks to inflation, higher costs. This is just one reason why it’s so important to factor health care costs into your retirement plan.

Evaluating Your Insurance Options

Choosing the appropriate insurance coverage is the first step to take when planning for unexpected health care costs in retirement. If you’re 65 or older and you’re eligible for Medicare, you’ll want to understand your options on acquiring insurance to supplement Medicare. To get an idea of what you can expect to pay, start by reviewing your eligibility and premium estimates.

Remember, there are a number of limits to what Medicare will cover, and even if Medicare covers a certain service or item, you may have to pay a deductible, coinsurance, and/or copayment. Medicare Part A and Part B do not cover a number of health care needs, including long-term care, foot care, most dental care, and more.

For these reasons, you may want to acquire comprehensive insurance to make costs more predictable and avoid extraordinary expenses. As Medicare doesn’t have a cap on out-of-pocket expenses, purchasing a Medicare supplement can help limit costs. Research your supplemental coverage options to ensure your health care costs won’t eat into your retirement savings.

Consider Pushing Out Your Retirement Date

If you were to retire before you turned 65, you’d need to obtain pre-Medicare coverage, which can be difficult to find at an affordable rate. If you wait to retire until you are 65 and eligible for Medicare, you will only be looking for a supplement to Medicare which will not be as expensive as the full coverage required had you retired before Medicare eligibility.  

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Focus on Your Health

While you can’t plan for everything in life, the better you take care of yourself, the less likely your health care costs will run you into the ground in retirement. Multiple studies show that if you exercise, keep your weight at a healthy level, avoid smoking, and get regular health checkups, you will have fewer health problems and therefore fewer health expenses.

In our recent podcast with Leslie Michelson, he shared some key steps you can take to improve your health and avoid costly health care mistakes.

Health care and Your Retirement Plan

Have you factored health care costs into your retirement plan? An argument could be made that during the season of life when the highest medical costs start to kick in that most are not spending as much of their monthly budgets on travel, hobbies, eating out, etc.  A larger portion of the income that has been planned and budgeted for monthly living could and would be directed to these higher health care costs if necessary.  Nonetheless, it is always prudent to be thinking about how these potential costs may play out and account for them in your thinking and planning. Whether you’re already retired, about to retire or are 10 years away, we’d be happy to answer any questions you have about Medicare, supplemental insurance, or saving for retirement. If you’d like to sit down and chat, call our office at (913) 624-9548 or email me at BKeen@KeenWealthAdvisors.com.

About Bill

health care costs
Bill Keen: Health care costs are a wildcard for retirees and are only expected to rise in the future.

Bill Keen is a Chartered Retirement Planning Consultant® and independent financial advisor with more than 24 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.

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