Retirement Planning

Healthcare Costs and Retirement: What You Can Do about Them


It should come as no surprise that the rising costs of healthcare consistently rank among the top worries of those who are in or nearing retirement. A 2022 Gallup report indicated that almost a third of Americans age 65 or older were concerned about covering necessary medical expenses in the next year. More recently, the Kaiser Family Foundation reported that half of US adults describe covering healthcare costs as “difficult,” and around 25% say they or a family member had a problem paying healthcare costs within the past 12 months.

Each year, the Milliman insurance consulting group assembles a forecast of expected healthcare costs for persons entering retirement. Their report for 2023 indicates that a male aged 65 will need savings of $185,000 to cover anticipated medical and healthcare costs during his remaining lifespan. This assumes that he is healthy and is enrolled in Medicare, including Part D and a Medigap plan. A woman of the same age and health and with the same coverage would need $203,000 in savings, since women’s lifespans are expected to be longer. Also, keep in mind that these are averages for healthy people; for those with known health challenges, expenses will likely be greater. Remember, too, that these figures are for someone who is presently 65; younger persons should take into account the almost-inevitable price inflation that will drive costs higher in future years.

Of course, the difficulty is compounded by the fact that as we age, we inevitably face higher healthcare costs. Even those who are trying to be proactive in their healthcare by taking advantage of screenings, medications, and other preventative measures must negotiate costs for such services that are rising each year.

On the other hand, there are some things you can do, whether you’re already retired or in the “glide path” toward retirement, to mitigate the expense of healthcare during your retirement. Some are rather simple and common-sense, and others may necessitate the advice and assistance of a qualified advisor.

Take care of yourself.

This probably seems obvious, but no one should underestimate the importance of good self-care. While we have no control over our genetics, each of us can be good stewards of what we have been given. Appropriate, regular exercise, watching what we eat, and following the advice of physicians—including taking medications as prescribed—will help you feel better and also preserve the health you have.

Take maximum advantage of employer benefits.

For those still working, it’s important to understand and utilize the healthcare and medical benefits offered by their employer. Some employers even offer retiree healthcare benefits; be sure to check whether this is available. In addition to prescription drug plans, these benefits may include wellness incentive programs that reduce insurance premiums, free or low-cost screenings, “health coaching,” and other benefits that can help you be healthier and better informed.

Become familiar with Medicare and Medicare supplement options.

Without question, Medicare is the leading healthcare option for most retirees, but the coverages can be complicated, so understanding all your options is crucial. Also, the wide variety of Medicare supplement plans means that making the right choice can be even more complex. This, in fact, is an area where the assistance of a trusted and knowledgeable advisor can be invaluable. The fact is that no two persons have exactly the same needs or resources, so making the best choice in coverage takes time and careful attention.

Consider a health savings plan.

If you are eligible, a health savings plan (HSA) can allow you to save on taxes while providing for healthcare costs. Contributions to the plan come from pre-tax dollars and thus reduce your taxable income, and disbursements from the plan to cover qualified medical expenses are not counted as taxable income. In contrast to the flexible spending accounts (FSAs) offered by many employers, funds in an HSA need not be used in a single year; they may instead be rolled over and saved to cover future costs. Growth of the funds within the plan is not taxed.

Becoming well-informed about future costs and coverage options is perhaps your best tactic to prepare for healthcare costs in retirement. Costs are unlikely to decrease, so the more you know now, the better decisions you’ll be able to make when the time comes.

At Aspen Wealth Management, we believe our clients deserve the best, most up-to-date information so that they can make the decisions that are right for them. To learn more, visit our website to read our article, “Do You Really Need Insurance in Retirement? It Depends.

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