Planning for Health Care Costs in Retirement

Planning for Health Care Costs in Retirement

During retirement, health care will likely be your biggest expense. The average 65-year-old retiring today can expect lifetime retirement premium costs of at least $288,400, according to a recent study.

Planning for health care costs during retirement presents a unique challenge because you cannot plan based on the national average alone. The cost for health care varies from person to person depending on your overall health, how long you live and your retirement age.

This uncertainty can be unnerving, but there are health care expenses you can plan for.

Health Care Costs to Expect During Retirement:

  • Medicare Premiums: Most people do not have to pay premiums for Medicare Part A (coverage for hospital stays), but will have to pay premiums for Part B (doctor visits and outpatient procedures), Part D (prescription drugs) and any other supplemental coverage for deductibles, co-pays and medications.
  • Out-of-Pocket Expenses: Medicare will not cover every medical expense and does not cover long-term care, vision or dental insurance. You should also plan for deductibles for Medicare Part A ($1,288 per year) and Part B ($166 per year and 20% coinsurance).
  • Increasing Yearly Medical Costs: The costs devoted to medical expenses increase as you age. According to a recent study, an average, healthy 65-year-old couple can expect to pay $644 per month in health care expenses in their first year of retirement. By 80-years-old, that same couple can expect to pay $1,724 per month.

Ways to Save for Health Care Costs in Retirement:

  • Long-Term Care Insurance: A semi-private room in a nursing home costs an average of over $75,000 per year. Consider purchasing long-term care insurance to cover assisted living costs. Long-term care insurance providers base premiums on age at purchase. The younger you are when you purchase a policy, the more likely your premiums will be lower.
  • Health Savings Account (HSA): Before you retire, consider acquiring a health savings account through your employer or on your own. An HSA allows you to contribute and withdraw money pre-tax to put toward health care expenses. Once you enroll in Medicare Part A and/or Part B, you can no longer contribute to your HSA. You may continue to withdraw from it even after enrolling in Medicare.
  • Medigap: You can use Medigap to cover expenses not covered by an Original Medicare policy such as coy-pays and deductibles. There are 10 Medigap policy options to choose from, each with varying levels of coverage and premiums depending on insurance provider, location and age.


Health care costs are extremely important for your retirement plan. Contact a Fifth Third Bank financial advisor today to start the retirement planning process.

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