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Retirement healthcare could cost $185,500 even with Medicare: How to prepare
Retirement healthcare could cost $185,500 even with Medicare. Learn how to plan for medical costs, insurance, long-term care and rising healthcare expenses.
Retirement does not mean your expenses suddenly disappear. Regular bills are still a huge part of your monthly expenditure even if you are someone who is healthy, has already paid off your home and does not plan to travel much.
As a retiree, groceries, utilities, insurance, clothing, transportation and other everyday needs are still a drag. The bare minimum need to retire in today’s economy is still $1 million or more, considering all the above needs and a possible health fiasco even with Medicare.
Healthcare could cost $185,500
A recent Fidelity study estimated that a 65-year-old retiring in 2026 could spend about $185,500 on healthcare costs during retirement. This amount refers to healthcare expenses paid out of pocket and is part of the money a retiree may need during retirement.
The Motley Fool said healthcare is difficult to avoid because medical expenses can continue throughout retirement. For someone who needs around $1 million or more to retire comfortably, healthcare could therefore take up a significant part of their retirement savings.
Also read: Warren Buffett says most investors should buy an S&P 500 ETF. Here’s why he recommends it
Medicare does not pay for everything
Having Medicare does not mean retirees will have all their healthcare bills covered. Seniors can still have to pay premiums, deductibles and co-pays even after enrolling in Medicare. Original Medicare also does not cover every type of medical service.
If a service is not covered by Original Medicare and the retiree does not have additional insurance, they may have to pay the full cost themselves, according to The Motley Fool. This is why simply counting on Medicare may leave retirees with a bigger healthcare bill than expected.
The $185,500 estimate could be even higher
The Fidelity estimate is based on a person who is 65 and retiring in 2026. But people who are still decades away from retirement may eventually face much higher healthcare costs. Inflation can increase the price of medical care and other services over time.
That means today's estimate should not necessarily be treated as the exact amount a younger worker will need in retirement. The Motley Fool said rising costs make it even more important for people to have a healthcare strategy before they retire.
One way to prepare is to add insurance to Medicare
One of the most important steps retirees can take is to consider additional insurance that fills the gaps in Original Medicare. These extra policies can increase monthly insurance costs. However, they can also reduce the amount a retiree has to pay directly when medical care is needed. The idea is to pay some predictable insurance costs now rather than risk facing much larger unexpected medical bills later.
Prescription drug coverage is one option
Retirees can choose a Medicare Part D plan to help cover prescription drug costs. They can also consider a Medicare supplement plan, which can help pay for certain healthcare costs that Original Medicare does not fully cover. These additional policies can provide more protection against out-of-pocket expenses. The right choice will depend on a person's healthcare needs and financial situation.
Medicare Advantage is another option
Instead of using Original Medicare with separate additional policies, retirees can consider a Medicare Advantage plan. These plans are offered by private insurance companies. Medicare Advantage plans provide the same basic benefits as Original Medicare and can also include additional benefits. This gives retirees another way to manage healthcare expenses and reduce the risk of paying large bills themselves.
Review your insurance every year
Healthcare plans and costs can change, so retirees should not simply choose a policy and forget about it. The Motley Fool recommends shopping around for new health insurance policies at least once a year. Comparing available options can help retirees find better coverage or a better price. The goal is to make sure healthcare costs do not unexpectedly eat into the money set aside for housing, food and other retirement needs.
Medicare does not cover all healthcare costs in retirement. Retirees may still have to pay premiums, deductibles, co-pays and other medical bills. Fidelity’s $185,500 estimate shows why healthcare should be part of retirement planning. Buying extra coverage, using preventive care and planning early can help manage these costs.
