Understanding Healthcare Costs In Retirement

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Factors that Affect Health Care Costs in Retirement:

Health Care Inflation:

Healthcare costs are rising rapidly, which is not expected to slow down anytime soon. According to a recent study, healthcare inflation has been increasing at about 6% per year, much higher than the overall inflation rate.

Chronic Health Conditions:

As people age, the likelihood of developing chronic health conditions such as heart disease, diabetes, and arthritis increases. These conditions require ongoing medical care, adding to significant expenses over time.

Prescription Drug Costs:

The cost of prescription drugs is another factor that can impact healthcare costs in retirement. Prescription drugs can be expensive, especially for those who require ongoing medications for chronic conditions.

Long-Term Care Needs:

Long-term care needs such as nursing home care or home health care can also be a significant expense in retirement. For example, according to the U.S. Department of Health and Human Services, a private room in a nursing home costs $8,821 per month.

Health Insurance Age 62 To 65 Average Cost

How Much Does Healthcare Cost In Retirement?

The average annual cost of health insurance for a retired couple in 2019 is:

Source: HealthView Services

Average Cost of Healthcare in Retirement:

The health insurance aged 62 to 65 average cost can vary depending on various factors, including location, age, and overall health. However, according to a recent study, the average retiree can expect to spend about $295,000 on healthcare expenses during retirement.

Average Monthly Cost of Health Insurance for a Retired Couple:

The average monthly cost of health insurance for a retired couple can also vary depending on location, age, and overall health. However, according to a recent study, the average monthly cost of health insurance for a retired couple is about $1,185.

Related Reading: Find out how much lifetime retirement income a couple can receive with our couples retirement calculator

Average Monthly Health Insurance Cost For Retired Couple

Factors Affecting Retirement Health Insurance Costs:

  1. Age: The older you get, the higher your healthcare costs will be, as you are more likely to require medical attention.
  2. Medical History: Your medical history and pre-existing conditions can impact your insurance costs, as insurers view them as a higher risk.
  3. Insurance Provider: The type of insurance provider you choose can impact your costs, as some may offer lower premiums but higher out-of-pocket expenses.
  4. Type of Coverage: The coverage you choose will also impact your costs. For instance, a high-deductible plan may have lower premiums but higher out-of-pocket expenses.
  5. Geographic Location: Healthcare costs can vary based on your geographic location. Urban areas typically have higher healthcare costs than rural areas.

Planning for Retirement Health Insurance Costs:

  1. Start Early: Start planning for retirement health insurance costs early on, as it will give you ample time to save and invest in the right plans.
  2. Understand Your Options: Research and compare different insurance plans and providers to find the one that fits your budget and healthcare needs.
  3. Consider Your Medical History: If you have a pre-existing medical condition, ensure that your chosen insurance plan covers it adequately.
  4. Plan for Emergencies: Set aside a contingency fund to cover unexpected medical expenses.
  5. Review Your Plan Regularly: Review your insurance plan to ensure it meets your healthcare needs and budget.
How Much Does Health Insurance Cost In Retirement

Managing Health Care Costs in Retirement:

Plan for Health Care Costs in Advance:

One of the most important things you can do to manage healthcare costs in retirement is to plan for them in advance. This means considering your healthcare needs and expenses when creating your retirement plan.

Consider Health Savings Accounts (HSAs):

Health savings accounts (HSAs) are tax-advantaged accounts that can help you save money for healthcare expenses. These accounts allow you to contribute pre-tax dollars and withdraw funds tax-free for qualified medical expenses.

Review Your Medicare Options:

Medicare is a federal health insurance program for people aged 65 and older. It is essential to review your Medicare options to ensure you are getting the coverage you need at a price you can afford.

Take Steps to Stay Healthy:

Staying healthy is one of the best ways to manage healthcare costs in retirement. This means eating a healthy diet, exercising regularly, and staying up-to-date on preventive care such as vaccinations and cancer screenings.

How Much Does Long-Term Care Cost In Retirement?

Service or FacilityAnnual Cost
Homemaker Services$53,768
Home Health Aide$54,912
Adult Day Health Care$19,240
Assisted Living Facility$51,600
Nursing Home Facility (Semi-Private Room)$93,075
Nursing Home Facility (Private Room)$105,850
Source: Genworth

What is the best way to pay for healthcare and long-term care costs?

There are several ways to pay for healthcare and long-term care costs, including:

  1. Private Health Insurance: Private health insurance can help cover medical expenses, but the cost of coverage can be expensive, depending on the level of coverage and individual health status.
  2. Medicare: Medicare is a federal health insurance program that provides coverage for people over 65 and those with specific disabilities. Medicare coverage includes hospitalization, doctor visits, prescription drugs, and more.
  3. Medicaid: Medicaid is a state-administered program that provides health insurance to individuals and families with low incomes. Medicaid covers many healthcare services, including long-term care in nursing homes.
  4. Long-Term Care Insurance: Long-term care insurance policies can cover expenses related to long-term care, such as nursing home care, home healthcare, and assisted living.
  5. Personal Savings: Personal savings can be an effective way to pay for healthcare and long-term care costs. Saving early and regularly can help build a nest egg for future healthcare expenses.
  6. Retirement Accounts: Retirement accounts, such as IRAs and 401ks, can be used to pay for healthcare and long-term care expenses, but early withdrawals can come with penalties and taxes.
  7. Reverse Mortgages: A reverse mortgage is a loan that allows homeowners to convert some of their home equity into cash. The funds can be used to pay for healthcare and long-term care costs.
Cost Of Health Insurance In Retirement

Next Steps

For many of us, retirement health insurance costs can present a significant financial challenge. But take the time to plan, understand the factors that impact your coverage, and regularly review your plan. You can make informed decisions that help protect your physical and financial well-being through retirement. Start planning early to ensure adequate coverage at a price that fits your budget. Research available plans from multiple providers – such as using an online comparison tool or receiving a free quote – as this will likely result in better protection for less money.

With the right approach and information, you could save hundreds or even thousands of dollars on premiums over the life of your policy. Use these facts to create a practical path forward for achieving the future you’ve always dreamed about. Request a free quote today and take strides toward securing your financial health before retirement arrives.

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Frequently Asked Questions

When should I start planning for retirement health insurance costs?

It is best to start planning for retirement health insurance costs early on, ideally in your 40s or 50s.

Can I change my insurance plan after I retire?

Yes, you can change your insurance plan after retirement, but finding affordable options may be more challenging.

What is Medicare, and how does it impact retirement health insurance costs?

Medicare is a federal health insurance program for people over 65. It can significantly reduce retirement health insurance costs but may not cover all medical expenses.

Are medical insurance premiums considered medical expenses?

Yes, medical insurance premiums are considered medical expenses. You can include these premiums when calculating your total medical expenses for tax purposes, which may qualify for a deduction if they exceed a certain percentage of your adjusted gross income.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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