Tips for Preparing and Planning for Health Care Expenses After Retirement


People plan and invest for decades in an attempt to ensure that their retirement years are stress-free. However, it is not uncommon to not understand how much money you need after retiring. You will need funds for housing if you don’t own a home without a mortgage, food, and paying bills. What is not widely known is the fact that there are other expenses during retirement. You need to have money available for health care expenses as well.

Health care expenses can be incredibly unpredictable for people in their  60’s and beyond. Many enjoy good health for their age, while others need a lot of medical care. Being proactive is in your best interest when you prepare for the future.  Use these tips to help you prepare and plan for health care expenses after you retire.

Have a Plan If You Intend to Retire Early

As of 2021, being at least 65 years of age is required to enroll in Medicare and receive coverage. But, many people opt to retire before they qualify for Medicare. Studies have found that the average age of retirement in the U.S. is 64. But it is not uncommon for people to retire in their early 60’s.

A small number of companies allow their retired employees to continue to participate in the employer-sponsored health insurance plan at a discounted rate, but it is rare. If you plan on retiring before you are 65, there are options. Look into COBRA or buying private health insurance on the marketplace. Depending on the situation, it is possible to use COBRA for 18 or 36 months. This can be a good bridge for those who are only a few years away from turning 65.

Deciding between whether or not to use COBRA may come down to price. With COBRA, you will pay for your monthly insurance premiums in full. Most employers cover a significant portion of each employee’s health insurance premiums. Thus, many people are surprised by how expensive COBRA is. If COBRA costs a lot more than you expected, look elsewhere.  You may have better luck finding an affordable health insurance plan on the marketplace.

Don’t Expect Medicare to Cover All Expenses

A common misconception about Medicare is that it covers all health care expenses for a retiree. Unfortunately, that is not the case. It is estimated that the average couple who retires will need at least $280,000 available from the beginning of retirement until the end of life to cover health care expenses. This is not a small sum of money, so plan for it.

Of course, every person is different and some Americans are not very healthy while others barely need any health care at all. Most Americans need prescription drugs when they are older and this adds to health care costs. The additional costs, even with Medicare, can be stunning. But for those who never need prescription drugs, their health care costs in retirement can be much less than the average.

Cost of Medicare Supplemental Insurance

Whether you’re young and looking into retirement costs or retirement is right around the corner, you should plan on being able to buy supplemental Medicare insurance. This will protect you from huge medical bills. The majority of people over the age of 65 do not need supplemental insurance for Medicare part A. Medicare part A covers hospitalization.

Medicare part B covers visits to the doctor, outpatient care that a person may need. It also covers a variety of medical issues. But it does not cover all medical expenses that someone may incur. The average retiree has a monthly premium of $148 for supplemental Medicare part B insurance. Medicare part D supplemental insurance helps cover the costs of prescription medication.

How to Prepare Your Finances

No matter where you are in your journey to planning for retirement, you need to prepare for the financial costs associated with medical care for retirees. In this day and age, there are financial planning software programs available, and they can be valuable. A good financial planning software program will give you the ability to review the amount of money that you have set aside.  You can review your retirement investments, financial goals, and expenses, and then make any necessary adjustments.

Use a financial planning software program such as WealthTrace designed to help people prepare for retirement.  It will help ensure that there are no surprises when someone reaches the age to leave the workforce. You can also project how much health care costs can increase before you run out of money in retirement. This will help you pick the correct retirement date and allow you to retire with much less stress.

Careful monitoring through software programs will give you the ability to make a budget and set aside money to ensure that you can comfortably pay for any medical care that you may need that is not paid for by Medicare. Your golden years will be much more enjoyable if you don’t have to worry about how to pay medical bills.