4 actions to help prepare for health care expenses in retirement

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Explore key considerations to manage rising health care costs during your retirement.

Health care expenses in retirement can vary greatly, which is why developing a specific-to-you approach for these costs can be a key part of effective retirement planning. Knowing your expected health care costs and coverage options could give you a better chance of meeting those obligations throughout your retirement — so you can stay focused on the excitement of what comes next.

Here are some strategies to consider when planning for health care expenses in retirement.

Estimate your costs.

Numbers vary widely. One study found that individuals at age 70, on average, can expect to spend more than $122,000 on health care through the end of their lives, with some expecting to spend more than three times that amount.1 But the right number to use as an estimate if you are healthy and active might be counterintuitive. For example, your health care costs in retirement can be greater if you’re healthier because you may need medical care over a longer lifespan.

Determine your expected health care benefits.

Few employers continue benefits into retirement, so you will need to explore your coverage options if you aren’t yet 65 and eligible for Medicare. (The increasing prevalence of freelance and contract work, and the overall rise in the gig economy, may mean that you’re self-insured and already have insight into that expense.)

Even if you are eligible for Medicare, you need to determine what the government will pay. Research your Medicare options online. Medicare might not cover what you expect.

Some examples:

  • Medicare may pay only a portion of costs for people staying in a rehabilitation center or nursing facility, and there are restrictions on what is covered.
  • Coverage is limited to certain skilled care procedures performed by a registered nurse or doctor, such as intravenous injections and physical therapy. It also doesn’t cover the cost of procedures such as routine dental care and hearing exams.
  • Procedures done to improve your appearance without a medical need are not covered.

Consider researching your medication coverage, as well. Before you retire, ask your pharmacy for a Medicare Part D report. It will provide a rundown of what your medications will cost in retirement and how much is covered for the various Part D options. Speaking of pharmacies, consider doing some comparison shopping to see if you could save money getting your prescriptions filled elsewhere. Switching to a mail-order pharmacy for regularly scheduled medications might also be worth considering.

Factor in long-term care.

Long-term care involves services people may need if they’re chronically ill or have disabilities rendering them unable to perform daily activities such as bathing or dressing. The need to prepare for those services may be more important than you think: According to the AARP Public Policy Institute (PDF), more than half of Americans age 65 or older need long-term care services at some point.2

In the case of Medicare, coverage kicks in only if long-term care is medically necessary — and then only for 100 days in a skilled or specialized nursing facility following a three-day inpatient hospital stay. The alternative — staying in a semiprivate nursing home — can prove costly. The monthly median cost of a semiprivate nursing home room is nearly $8,000 a month.3

Research options to fill the gap.

Whether you qualify for coverage under Medicare or not, you’ll likely need an additional resource to help balance benefits and costs. Those who have Medicare may want to consider a supplemental health insurance policy such as Medigap. Such a policy helps you pay for some of the medical costs Medicare doesn’t cover.

Purchasing a long-term-care insurance policy may help you avoid, or at least reduce, the amount you might need to pull from your savings or that a family member might need to contribute to cover long-term care costs. The average stay in a long-term-care facility is three years, which can add up if you don’t opt for long-term-care insurance. If you stay in a semiprivate room in a nursing home for three years you may expect to pay roughly $280,000 or more, depending on your required level of care.3

The two main forms of long-term-care insurance are traditional and hybrid. The traditional variety typically involves paying an annual premium and lets you choose how much coverage you want. The coverage is only valid if you are paying premiums.

The hybrid variety is actually a life insurance policy that allows a portion of the policy’s cash value to be used for long-term care. Beneficiaries can also receive a death benefit when you pass away. Death benefits will typically be reduced if long-term care benefits are used.

Retirement planning really boils down to understanding and mitigating the biggest risks. Then you can decide how to address the risks so that you’ll feel comfortable about your future.


1“The Lifetime Medical Spending of Retirees.” National Bureau of Economic Research, September 2018.
2“Long-Term Services and Supports. ” AARP Public Policy Institute, August 2019.
3“Cost of Care Survey.” Genworth, 2020.

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