facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause

Plan for Health Costs

Plan for Health Costs

What is retirement? Is it a chance for you to travel the world, play with the grandkids, take up that hobby you have been putting off, or just relax and read a book? Yes, retirement can be all these things and more. Unfortunately, your retirement years are also when your body starts to slow (and break) down.

You may not notice it immediately. Say you retire at 65, full of energy and with no health problems. But in five years? Ten years? Fifteen? By that time, you’ll be eighty. They say age is a state of mind, but it is also a fact of life, and this fact means inevitable changes to both your health and your pocket book.

There is no use being anything less than blunt about it. Your medical expenses will go up after retirement, and the further into retirement you are, the higher your expenses will likely be. But many pre-retirees fail to plan for these costs. It’s a major mistake that too many pre-retirees make.

Those who do plan often underestimate exactly how much their medical expenses will cost. For example, a 2013 study by Fidelity Investments suggested that 48% of people ages 55 to 65 believe they will need only $50,000 to pay for their health-care costs in retirement.1 But the true number is likely to be much higher than that. According to the Employee Benefits Research Institute, a couple on Medicare with median drug expenses (meaning at the mid-point of expected prescription drug use for retirees) needs approximately $151,000 in savings “to have a 50 percent chance of having enough money to cover health care expenses in retirement.”2

That is a lot of money. There are just so many aspects of health care that will have to be covered. Besides medicine, there are regular visits to your doctor, hospital stays, surgeries, long-term care, and more.

Hopefully this gives you a little glimpse of how important it is to plan for your medical expenses. But how do you pay for them? The obvious answer is “work longer and retire later,” but let’s delve a little deeper. Here are a few things you can do:

1. Learn your various Medicare options.

If you are one of the lucky few who will have employer-provided health care coverage even after retirement, congratulations. But if not, start familiarizing yourself with the intricacies of Medicare now. The Federal government’s health insurance program for seniors is often referred to as a single plan, but in reality, it is many types of plans rolled into one. From the basic level of coverage (Part A) to “Medicare medical insurance” (Part B), which covers outpatient hospital care, physical therapy, and home health care, to the more elaborate “Medicare Advantage” plans, most retirees are confronted with too many options, some of which are more appropriate than others. Choosing the best type of coverage for you will be crucial when it comes to paying for your medical expenses.

2. Look at Medigap.

Medigap supplemental insurance is sold by private insurance companies, and is designed to help pay those costs not covered by Medicare. Medigap isn’t free, and certain criteria must be met before you can purchase it, but it is definitely a route to consider.

3. Invest properly.

Your investment portfolio can be an invaluable tool if used wisely. One way to use it wisely is to invest a portion of your money with growth in mind. It’s often thought that growth-oriented portfolios are for younger people, while retirees should trend toward more conservative investments. And while there is some truth to that, it’s important to keep your retirement savings ahead of inflation. Being overly conservative prevents you from being able to do that.

4. Consider long-term care insurance.

Important disclaimer: not everyone will need long-term care or assisted living in their lives. That said, many people do, and long-term care (LTC) insurance is one of the best ways to pay for it. It can be beneficial to purchase LTC insurance sooner rather than later, as premiums can get higher as you grow older. However, LTC is expensive in and of itself, so give the subject a lot of careful consideration before making a decision.

5. Keep your body healthy.

I am a financial advisor, not a doctor or trainer, so I am not in the business of providing tips on healthy living. But this one is just common sense, and it’s amazing how often it is overlooked. Keeping yourself healthy now can save you a lot of money in the future. By getting regular exercise, eating a healthy diet, sleeping enough, and quitting smoking (among other things) you can give yourself a better chance of avoiding many of the problems that plague retirees. Conditions like high blood pressure, diabetes, and cancer can extract a high toll on your savings as well as your health. So the single best way to ensure a long, happy, and financially secure retirement is to get your body in as good of condition as possible before you bid bon voyage to employment.

As you can see, paying for health care expenses is a huge part of retirement. As you create your retirement plan, make sure you give the subject all the attention it deserves. Of course, if you have any questions about how to choose the proper Medicare plan, how to invest properly, or whether long-term care insurance is right for you, please feel free to give my office a call at 301-791-7910. I would be happy to help you.


1 Shelly Schwartz, “Overlooked health-care costs,” CNBC, November 4, 2013, http://www.cnbc.com/id/101137178

2 “Amount of Savings Needed for Health Expenses for People Eligible for Medicare,” ERBI, Oct. 2013, http://www.ebri.org/pdf/notespdf/EBRI_Notes_10_Oct-13_RetSvgs-IRAs.pdf