Tips to Help Keep Your Retirement Healthcare Costs Under Control

Careful long-term planning combined with healthy lifestyle choices and smart shopping can help you reign in medical expenses and keep you both physically and financially fit.

Female African American Seniors Exercising

by NEA Member Benefits

Key takeaways

  • Medicare has many parts and may cover only a portion of your health care costs.
  • Estimating your retirement health care costs allows you to build those costs into your retirement budget.
  • Making healthy lifestyle choices, such as eating well and exercising, can help hold down medical expenses.

Health has a direct effect on retirement confidence and financial wellness. The most recent Retirement Confidence Survey from the Employee Benefit Research Institute found that the healthiest workers are the most confident about their upcoming retirement. And the correlation carries over to retirees. Almost half (46%) of confident retirees are in good health. Retirees in fair or poor health are more likely to have difficulty in managing their money in retirement—particularly when it comes to managing healthcare costs.

This is not surprising given the rising costs of medical care and health insurance. Fidelity’s 16th annual retiree healthcare costs estimate suggests that a 65-year old couple retiring in 2018 would need $280,000 to pay for medical expenses throughout retirement. This includes insurance premiums, co-pays and out-of-pocket costs, but excludes long-term care expenses.

The lesson is clear: healthcare will take a big bite out of your retirement income. By some estimates, you’ll spend more on medical care than food. You need to plan for these costs and actively manage medical expenses throughout retirement.

Here are some steps you can take to keep your healthcare budget under control:

  • Get a grip on Medicare. Medicare is the primary source of health coverage for those age 65 and older. Most workers automatically qualify for health insurance through Medicare Part A, which costs nothing if you paid Medicare taxes during your working years. Medical insurance (covering doctors, outpatient hospital care and other medical services) is known as Part B, and you’ll pay a monthly premium for this, based on your income. Prescription drug costs continue to skyrocket and Medicare Part D covers a portion, but not 100%. At you can learn more about your Medicare choices.
  • Cover the early retiree Medicare gap. On average, educators retire at about age 58, a full 7 years prior to Medicare eligibility. If you find yourself in this insurance gap, you may have to:
    • Pay to continue your employer coverage under COBRA
    • Join your spouse’s company health plan
    • Purchase your own health insurance on the private market.
  • Make health care part of your retirement planning. Insurance premiums are known costs, so factor those into your household budget. You’ll also want to estimate your annual medical costs beyond insurance premiums, so you can set aside money for this purpose. The Health Care Costs calculator from AARP can help estimate your health care costs in retirement. You may also want to look into buying long-term care insurance since these potentially significant costs are not covered by health insurance or Medicare. As an NEA member, you have access to the NEA Long-Term Care Program.
  • Be a smart health care consumer. Too often, people simply do whatever their doctor tells them to do, without any research. Shop for health care the way you shop for clothes or appliances. Look at different providers and compare services. Find a good primary care physician, specialists, and hospitals that are in your insurance network and determine which ones offer the best care at the best prices. Don’t be afraid to negotiate lower fees for specific procedures. Ask lots of questions to discover ways you might be able to reduce costs before having a procedure, and be sure to understand every aspect of what your doctor is prescribing. Ask your pharmacist about lower-cost prescription drug alternatives.
  • Stay healthy. Sounds like a no-brainer, but not getting sick will definitely hold down your medical expenses. A recent survey conducted by money management firm United Income found that today’s retirees are healthier, wealthier and living longer than previous generations. They are focused on quality of life rather than just getting by. You can be part of this group by eating well, exercising, getting lots of sleep and reducing stress. You’ll not only save on healthcare costs, you’ll feel better and enjoy life more.

Next to housing, medical costs may be your largest expense in retirement. Careful long-term planning combined with healthy lifestyle choices and smart shopping can help you reign in medical expenses and keep you both physically and financially fit.

Retirement solutions for NEA members