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Medicare Costs in Retirement

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Tags: Medicare, Medicare supplement plans, retirement planning

One of the biggest costs consumers face in retirement is health care costs. A new study estimates that a healthy 65 year old couple retiring this year will spend $265,589 for Medicare related coverage.  In 10 years the cost climbs to $320,996.

The costs include Medicare Part B premium, Medicare Part D and supplemental insurance. Including other health related costs including dental, vision, hearing, co-pays and out-of-pocket costs the lifetime cost for a couple retiring this year increases to $394,954.  In ten years, that cost can expect to grow to $463,849.

"The report demonstrates that health care costs will account for a very significant and growing portion of retirees' budgets," said Ron Mastrogiovanni, Founder and CEO of HealthView Services. "The data also shows that Medicare-related costs are only part of the story. Retirees need to plan for health-related expenses not covered by Medicare, and the potential impact of income-based Medicare surcharges."

The company estimates that health care related costs will consume 67% of their lifetime Social Security benefits.  In ten years, over 90% of Social Security benefits could be consumed by health care costs.

That is why it is important to understand and plan for your health care costs before you retire.  And to make sure that you understand the Medicare plan choices and the cost trade-offs between Medicare Advantage and Medicare supplement coverage.

At Longevity Alliance, we talk about the difference as being a preference for paying upfront or paying – you- go.

  • A Medicare Supplement plan is a pay upfront plan:  it costs more per month than a Medicare Advantage plan but you have few or no costs when you use your plan.  You also have the benefit of going to any doctor or facility that accepts Medicare.

 

  • .A Medicare Advantage plan is a pay-as-you-go plan:  It costs less per month than a Medicare Supplement plan but you will pay each time you use health care services.  You will have a maximum out of pocket expenses and you will be restricted to using network of doctors and facilities.

Given the amount of money you’ll pay for healthcare in retirement, it is smart to shop and compare Medicare plans annually to make sure you have the right coverage at the right price.  Medicare Advantage and Part D plans can change every year, so it is important to shop and compare plans every year during the Medicare Annual Enrollment period (October 15-December 7).

Medicare Supplement plans can be changed any time of the year but in most cases you will have to answer health questions to be eligible for a new plan. Because these plans are standardized – the plan coverage is the same for any letter plan from any company you buy from (Plan F, for example,is the same coverage no matter what insurance company you purchase from).

With so much of your retirement income committed to health care costs, you can’t afford to buy and forget it.  It’s smart to compare Medicare plans to always make sure you are in the best plan possible for you – at the best price.                                                   

 

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  • Medicare Coverage

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