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3 Types of Out-of-Pocket Health Care Costs You’ll Face in Retirement

Filed under: Retirement, Managing Healthcare Expenses

Have you developed your retirement budget? It’s an important financial tool that can help you manage your spending and preserve your retirement assets. You’ll likely face expenses for things such as housing, food, utilities, travel and more. You may also face costs for things like taxes and debt.

One expense you don’t want to ignore, though, is health care. You may think that Medicare will cover most or all of your health care costs. The truth is there are many medical expenses that aren’t covered by Medicare. In fact, Fidelity estimates that the average retired couple will spend $275,000 on out-of-pocket medical expenses.1 That figure doesn’t even include the cost of long-term care.

Out-of-pocket medical costs can present a difficult challenge for retirees. As you get older, your risk of suffering an injury or illness increases. Depending on your needs, medical expenses could be a drain on your retirement assets.

The good news is you can take action to limit your out-of-pocket expenses and protect your budget. Below are a few of the most common sources of health care costs in retirement. By understanding your potential health care costs, you can develop a funding strategy.


Premiums, Deductibles and Copays

You’ve likely been paying into the Medicare system your entire career. Because all workers pay Medicare taxes, you may assume that coverage is free. Part A, which covers hospitalizations, doesn’t have a premium. The other parts, however, do have monthly premiums.

It’s also important to remember that all parts of Medicare have deductibles and copays. The amounts depend on your specific policy. The more robust your coverage, the higher your premiums are likely to be. You can reduce your premiums by changing your coverage, but doing so may increase your deductible and copay.


Noncovered Services

There are many services that simply aren’t covered by Medicare. Things such as dental services, vision, hearing and even physical therapy usually aren’t included in Medicare plans. That means you’ll have to pay out of pocket for all those services.

You can use a program called Medicare Advantage to obtain coverage for these services and more. Medicare Advantage, also known as Part C, allows private insurers to offer Medicare policies directly to seniors. These policies usually include traditional Medicare protection plus enhanced coverage.

There are a wide range of Medicare Advantage policies available, so it’s important to consider your specific needs, budget and objectives before you purchase a policy.


Long-Term Care

According to the U.S. Department of Health and Human Services, many retirees can expect to utilize long-term care at some point in their lives. The agency estimates that today’s 65-year-olds have a 70 percent chance of needing long-term care in the future.2

As you may know, long-term care can be costly. According to Genworth, the average monthly cost for an assisted living facility in 2017 was $3,750. The average cost of an in-home health aide was more than $4,000.3 Many retirees need long-term care for many months or even several years, and the costs can add up to be a drain on retirement assets.

You may want to consider purchasing long-term care insurance. You pay premiums to an insurer, which then covers some or all of your long-term care expenses. Most policies cover care provided either in a facility or in the home. Some even provide a death benefit to loved ones in the event that you don’t need the long-term coverage.

Ready to develop your health care funding strategy? Let’s talk about it. Contact us today at Ambrose Financial & Insurance Services. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.






Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

17508 – 2018/3/26