Navigating Healthcare Costs in Retirement: What You Need to Know

Did you know that the average 65-year-old couple today will spend around $12,000 on healthcare in their first year of retirement? According to Fidelity, healthcare is one of the largest, yet often overlooked, expenses in retirement planning. Having an advisor can help you better navigate and develop a clear strategy for healthcare costs. At 210 Financial, we’re here to help you navigate these costs so you can maintain your lifestyle. Here are four key questions to ask yourself when preparing for healthcare costs in retirement:

How much could medical expenses cost me in retirement?

“A healthy 65-year-old couple who retired in 2023 will likely use nearly 70% of their lifetime Social Security benefits to cover their medical costs in retirement”, according to Fidelity. The best approach is to evaluate your medical history, family health history, and your location. Consider potential long-term care needs and other healthcare expenses. As our founder Phil Cooper highlights in his book, Retirement Blueprint: Finding Your 210 Life, “The average cost of a private nursing home room in the United States in 2021 was $9,034 a month. But keep in mind, that it is just the nursing home; it doesn’t include other medical costs, let alone pleasantries, like entertainment or hobby spending.” Planning ahead is crucial.

What does Medicare cover, and how much does it cost?

The rule of thumb is that you pay a monthly premium and a portion of the costs each time you get a covered service. According to Medicare.gov, there is no yearly limit on what you pay out of pocket unless you have Medicare Supplement Insurance, or by joining a Medicare Advantage Plan.

• Medicare Part A (Hospital Insurance): This plan covers inpatient hospital stays, nursing home care, hospice care, and some home health care.
• Medicare Part B (Medical Insurance): Covers certain doctors’ services, outpatient care, medical supplies, and preventive services with a monthly premium.
• Medicare Part D (Prescription Drug Coverage): Helps cover the cost of prescription drugs.

Each plan varies, so visit medicare.gov to find the best option for you. For more details check out our in-depth blog post on Medicare coverage options.

What about my future long-term care needs?

With life expectancy in the U.S. at 76.33 years, many retirees underestimate their longevity. Failing to plan for a longer life can negatively impact your financial future. Long-term care costs, including nursing homes, and assisted living, can quickly deplete your savings. Long-term care insurance is one option, but it can be costly. Planning for these expenses early can help protect your financial future. Even if you are covered with Medicare, the cost of long-term care eats through your savings, and many are unprepared to meet those costs.

Are there other ways to prepare for healthcare costs in retirement?

Yes, there are several strategies to consider:

• Self-fund in a 401K and IRA accounts: This is a very traditional retirement savings account that can be used to cover medical expenses.
• Health Savings Account (HSA): A health savings account is a tax-advantage investment account for medical expenses. The contributions are tax-deductible, so you won’t pay taxes on them. You can use them for qualified medical expenses like co-pays, co-insurance, and prescription drugs. And once you hit 65 you can use the funds to take care of most expenses except for out-of-pocket medical costs. Additionally, you won’t pay taxes on investment earnings.

Conclusion

Most people do a lot of prepping for retirement and are on the right track but underestimate the costs and forget about the unexpected costs. As highlighted in Retirement Blueprint: Finding Your 210 Life, “The best thing you can do for yourself is to scope out the healthcare field early, compare costs often, and prepare for out-of-pocket costs well in advance; decades, if possible.” At 210 Financial we have financial advisors that can assist you in building a plan so you can be better prepared when navigating healthcare costs in retirement. Don’t let unexpected expenses cloud your sunny days.

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210 Wealth Management, Inc., d/b/a 210 Financial, is a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. 210 Financial, Form ADV Part 2A & CRS can be obtained by visiting: https://adviserinfo.sec.gov and search for our firm name.  Insurance products are offered through 210 Financial, Inc. d/b/a 210 Financial.