Retirement Planning

Plan Ahead for Out-Of-Pocket Health Insurance Costs

If you're close to retirement, start planning now for your retirement healthcare costs. It's important to think about out-of-pocket expenses that Medicare won't cover like deductibles and co-insurance.

Paying for Health Insurance Expenses in Retirement

A big part of retirement planning includes budgeting for health insurance expenses. And as a population that's living longer, we need to ensure that we don't run out of money to pay for that health care coverage at a time when we may need it the most.

Some of us may be looking at spending 30 or more years in retirement, we can't afford not to stay healthy in our golden years. But we also can't be naïve about how much out-of-pocket health insurance costs are going to be. To help get you started, you may want to consider the following out-of-pocket insurance costs when fine-tuning your retirement plan.

Options for Retiring: Medicare and Medigap

Did you know that when you become eligible for Medicare at age 65, you'll still have to pay for your health care coverage? That's right - Medicare isn't free. In fact, the average Medicare premium for those not eligible for premium-free Part A in 2017 was as high as $413.00 a month, and the average Part B premium was $109.00.1 And if you want prescription coverage (Part D), or additional options with Part C, you'll need to add in those costs as well. Keep in mind that these are just your monthly premiums, and you'll need to factor in out-of-pocket costs for deductibles and co-insurance.

If you're hoping to fill in some of the holes in your Medicare plan, a Medigap policy can be a good way to go. However, not only will this type of personal insurance plan add onto your monthly health care bill, it won't cover everything.

Reduced Benefits when Retiring Under your Employer's Plan

It's certainly positive if your employer offers you a continuation of your health care benefits in retirement. However, when you become eligible for Medicare at age 65, your employer may reduce the coverage provided through your company plan in order to control costs. That means that you may end up shouldering the bulk of your insurance yourself. And if your benefits end when you leave your job (and you're still a few years away from your 65th birthday) you'll have to factor in premiums for individual health care insurance until you can tap into Medicare.

Save, Save, Save

If you're retiring soon, it's time to start saving for those out-of-pocket costs to help pay for health care insurance and associated costs in retirement - even if you have Medicare or a private plan. To learn more about health care costs and how much you'll need to save for health care in retirement, try using AARP's Health Care Costs Calculator.


1. http://www.medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html

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