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A recent Fidelity® Investments study1 found that a couple aged 65 in 2018, on average, can need as much as $280,000 in after-tax2 savings to cover their health expenses during retirement. That may seem daunting, but you can take steps to help lower your healthcare costs. Here are some steps you can take to be prepared for healthcare costs in retirement.
Plan for Out-of-Pocket ExpensesTrue, Medicare Part A is free, and if you worked long enough to qualify for it, Medicare Part A will cover hospitalization. However, you’ll still have monthly premiums, co-pays and out-of-pocket expenses if you want coverage for other expenses, including preventative care. These premiums are means tested. That means they increase based on income, as well as being adjusted based on your location and the specific plan you choose.
According to the Centers for Medicare and Medicaid Services, the standard Medicare Part B premium was $134 for married couples making less than $170,000 in retirement income in 2018.3 Premiums increase significantly as income levels go up. A qualified financial planner can help guide you in factoring estimated out-of-pocket costs into your financial retirement plan.
Get Creative with Prescription CoverageIf you opt for Medicare Part D or for a Medicare Advantage plan, you may receive some coverage for prescriptions. But, even so, it’s a good idea to look for ways to reduce costs. Paying cash is one of those.
Before your pharmacist processes a prescription through your medical insurance, ask the pharmacist for the cash price. While Medicare co-pays still may be the most cost-effective approach, you may be surprised to find that paying cash and bypassing insurance altogether is your cheapest option. Typically, medications that are well established are your best bets for lower cash prices. Better yet, go over your medication list with your pharmacist well in advance of needing a refill, and get cost comparisons for all of them.
Another option that sometimes can be cheaper than insurance co-pays is to use medication discount programs. You can compare drug prices across various pharmacies to see where your best deals are. You are likely to find the best potential savings on generic drugs that have been around awhile. And speaking of generic, always ask your doctor to allow a generic substitute whenever possible.
Take a Bite Out of Dental CareIt is likely that Medicare’s dental coverage will be minimal. The Consumer Health Alliance suggests looking into area dental schools for free or very low-cost services. While you can expect to save significantly over private dental care, plan ahead for visits as demand is high for these good deals.
Dental savings programs are also worth a look. They offer discounts off standard dental costs. Review the policies closely and calculate your savings based on your historical usage of dental care. If you only go to the dentist once a year for a routine check-up, the program costs may not be worth the discounts you’d receive. But if you have chronic dental issues or expect to need significant dental services, you could stand to save money.
Consider Long-Term Care InsuranceThe Administration on Aging reported in October 2017 that some 70% of adults age 65 and older today will need long-term care services.4 Don’t count on Medicare to cover all of those costs. In fact, Medicare provides only minimal short-term coverage for intermediate care if you're confined to your home and the treatments are ordered by a doctor. Long-term care may be an option if you want to retain your independence, help protect your assets, and maintain your standard of living should you need long-term healthcare. The younger and healthier you are when you purchase a policy, the lower the premiums will be.
Take Control of Your HealthLeading a healthy, active, socially engaged retirement lifestyle is by far the best way to reduce healthcare costs as we age. Daily exercise, whether it is working in the yard, a stroll around the neighborhood, or a cardio class at the gym, is critical to controlling your weight and keeping your heart healthy. Improve your balance with yoga and Pilates classes; 25% of older adults fall every year, and one of five of those falls leads to serious injury. Don’t forget to fall-proof your home to reduce your risk of a painful and costly misstep.
Finally, take advantage of your hard-earned free time to get engaged socially. Join a book club or travel group. Entertain friends and family. Check your local library, church, or community groups for activities that fit your interests. The more engaged you are socially, the less likely it is to be depressed or lonely and the greater likelihood for overall good health.
1 According to Fidelity® Investments' 16th annual retiree health care cost estimate; Read the Study
2 CFS does not provide tax or legal advice. For such guidance, please consult a tax and/or legal advisor.
3 2018 Medicare Parts A & B Premiums and Deductibles; Read the Fact Sheet
4 LongTermCare.gov “How Much Care Will You Need?” Read the Report
5 Non-deposit investment products and services are offered through CUSO Financial Services, L.P. ("CFS"), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. UFCU has contracted with CFS to make non-deposit investment products and services available to credit union members.
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