Can You Afford Health Care in Retirement?

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At age 65, some couples may need as much as $413,000 to cover health care costs in retirement, according to a January report from the Employee Benefit Research Institute. That’s an extreme case, representing two people with high prescription drug costs — but it’s not outside the realm of possibility.

“It’s one of the most difficult expenses to predict in retirement,” says Nancy Nawn, a certified financial planner in Cherry Hill, New Jersey.

Your costs will depend on your insurance choices, your health, your prescription drugs and your city. (Costs are higher in some places than others.) As you approach retirement, try these tactics to get a handle on future health care expenses.

Save to a health savings account

“I think most people use them as they go, which is fine too,” says Ed Snyder, a CFP in Carmel, Indiana. “But I think there are even more benefits to using the investment account in those [and] letting that money be invested for many years, just like a retirement account.”

In 2024, you can save up to $4,150 for an individual health savings account and up to $8,300 for family coverage. If you’re 55 or older, you can contribute an extra $1,000. (Note: You can’t save to an HSA once you’re signed up for Medicare.)

Shopping for Medicare plans? We have you covered.

Pick the right Medicare plan

Once you’re 65, advisors typically recommend selecting Original Medicare with Medicare Supplement Insurance, or Medigap. Since Medigap plans cover many out-of-pocket expenses of Medicare, this keeps your monthly health care costs predictable.

Many older adults are attracted to the $0 premiums of most Medicare Advantage plans, but using these private health plans means you may be limited to in-network doctors and hospitals. “I have seen many situations where people wind up needing to go see a provider who doesn’t take the coverage, and they pay the full bill themselves,” says Melinda Caughill, co-founder and CEO of 65 Incorporated, which offers guidance on Medicare.

Out-of-pocket maximums for Medicare Advantage plans also can be as high as $8,850 per year in 2024, and that doesn’t include your Medicare Part B (medical insurance) premiums. That said, if you can’t afford a Medigap plan, Medicare Advantage may be the better option. Without Medigap, Original Medicare has no out-of-pocket maximum.

Get help with tax planning

If your income exceeds a certain threshold, you will pay more each month for Medicare Part B and Medicare Part D prescription drug coverage (if you have it). This is where it helps to be strategic about your retirement income, making sure you have both pretax and post-tax accounts to pull from as needed. (Pulling from pretax accounts raises your income.)

“If you have saved a lot of money in tax-deferred vehicles, and you haven’t planned to do either Roth conversions or spend down that money, you could wind up having a much larger monthly Medicare premium than you think,” Nawn says.

Pay down your mortgage

If you’re 62 or older and have at least 50% equity in your home, you may have access to a reverse mortgage later if you really need it. This is a loan or line of credit on your assessed home value — and you don’t have to make payments. The loan is repaid when you move out or die.

Reverse mortgages once had a scary reputation, but today’s products are safer, Nawn says. “There was abuse many, many years ago,” she says. “It’s been cleaned up, and it’s a really great tool to have in your back pocket.”

Keep in mind that reverse mortgages require at least one borrower to live in the home, and they cost more than a traditional home mortgage over time. Work with an advisor who’s familiar with the product before you take the plunge.

Consider a HELOC

If you’re younger than 62 and you’re still working, a home equity line of credit (HELOC) can provide you with a stream of income to tap later if you need it. (It’s easier to qualify for a HELOC while you’re still getting a paycheck.)

The catch: Unlike a reverse mortgage, a HELOC requires you to make payments. “At some point in the future, you’re going to have to pay it back,” Nawn says.

Keep things in perspective

In the end, don’t lose too much sleep over the big figures. Consider how intimidating it would be if experts also told you how much you should save to cover 30 years of food or utility bills in retirement. With the right planning, health care costs can be manageable.

“A reasonable cost is about $6,000 a year for an individual, and if you price that out on a monthly basis, it’s $500 a month,” says Dick Power, a CFP in Walpole, Massachusetts. “That $500 a month typically includes your insurance coverage and your copays.”

This article was written by NerdWallet and was originally published by The Associated Press.

Dive into the intricate world of retirement health care costs with a fresh perspective. Rather than simply providing numbers and advice, let’s explore the nuances and complexities of predicting and managing health care expenses in retirement. From the unpredictability of insurance choices to the impact of location and prescription drugs, there are layers to consider. Discover innovative tactics, such as saving to a health savings account and choosing the right Medicare plan, that can help you navigate this crucial aspect of retirement planning. By delving deeper into tax planning, mortgage options, and home equity lines of credit, you’ll find a variety of strategies to protect your financial well-being in your golden years. And amidst the daunting figures, remember that with careful planning, health care costs can be kept under control. Explore a world where financial security and peace of mind go hand in hand, setting the stage for a fulfilling retirement journey.

Title: Can You Afford Health Care in Retirement?


As we approach retirement age, many of us start to think about the financial implications of aging – particularly in terms of healthcare costs. The rising cost of healthcare in the United States has become a major concern for retirees, with many wondering if they will be able to afford the care they need as they grow older. In this article, we will explore the challenges of affording healthcare in retirement and provide some tips on how to plan for these costs.

Understanding the Cost of Healthcare in Retirement:

Healthcare costs have been steadily rising in recent years, and this trend is expected to continue as the population ages. According to a report by Fidelity Investments, a couple retiring in 2021 can expect to spend an average of $300,000 on healthcare costs throughout their retirement. This staggering figure includes expenses such as premiums, deductibles, copays, and out-of-pocket expenses for services not covered by Medicare.

One of the biggest challenges retirees face when it comes to healthcare costs is the uncertainty of how much they will need to budget for. Health issues can arise unexpectedly, and the cost of care can vary greatly depending on the type of services needed. Without a solid plan in place, retirees may find themselves struggling to afford the care they require.

Planning for Healthcare Costs in Retirement:

To ensure that you can afford healthcare in retirement, it is crucial to start planning early. Here are some steps you can take to prepare for the costs of care:

1. Estimate Your Healthcare Needs: Begin by estimating how much you expect to spend on healthcare in retirement. Consider factors such as your current health status, family history, and lifestyle choices that may impact your future healthcare needs.

2. Budget for Health Expenses: Create a separate budget for healthcare expenses in retirement. Include costs such as premiums, deductibles, copays, prescription medications, and long-term care services.

3. Research Health Insurance Options: Explore your options for health insurance coverage in retirement. Medicare is available to most individuals age 65 and older, but additional coverage may be necessary to supplement gaps in Medicare coverage.

4. Consider Long-Term Care: Long-term care services, such as nursing home care or in-home assistance, can be a significant expense in retirement. Consider purchasing long-term care insurance to help cover these costs.

5. Save for Healthcare Costs: Set aside a portion of your retirement savings specifically for healthcare expenses. Consider opening a health savings account (HSA) to save for medical expenses tax-free.

6. Stay Healthy: Taking care of your health can help reduce your risk of chronic conditions that may require costly medical treatments. Maintain a healthy lifestyle by exercising regularly, eating a balanced diet, and attending regular check-ups with your healthcare provider.

Seeking Assistance with Healthcare Costs:

If you find yourself struggling to afford healthcare in retirement, there are resources available to help. Look into programs such as Medicaid, which provides healthcare coverage for low-income individuals and families. Additionally, you may qualify for assistance through state or federal programs that offer subsidies for health insurance premiums.


Affording healthcare in retirement can be a daunting task, but with careful planning and budgeting, it is possible to navigate the costs effectively. By estimating your healthcare needs, budgeting for expenses, researching insurance options, saving for future costs, and maintaining good health, you can prepare yourself for a financially secure retirement. Remember to seek assistance if needed and explore all available resources to help cover your healthcare expenses. With the right approach, you can ensure that you can afford the care you need in retirement and enjoy a healthy and happy life as you age.

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