Lower Your Healthcare Costs in Retirement

When you’re planning for retirement, accounting for the cost of healthcare becomes an important part of your overall equation. In fact, the burden of healthcare can be so great that retirement appears impossible to many people. According to a recent study by Fidelity, a couple retiring this year will need $220,000 to cover healthcare costs throughout their retirement. The problem is twofold; healthcare costs are rising, and people are living longer. This translates into more money spent on healthcare each year, along with more years spent in retirement.

Luckily, there is one simple way you can significantly lower your healthcare costs in retirement: Wait a few more years before retiring.

When you leave your full-time job, this usually means you also leave behind your employer-sponsored health care coverage. At current time, only 28 percent of companies which employ 200 or more people still offer post-retirement health insurance. Even if you’re one of the lucky few, you may be responsible for more of the premium or be subject to higher deductibles and co-pays.

Medicare eligibility begins at age 65, though the program can be extremely limited in what it covers. Often it is necessary for retirees to purchase additional supplemental coverage, and even then we know that out-of-pocket costs are rising.

So what happens if you want to retire at age 62, and your employer-based health insurance won’t continue? You could endure three years of high healthcare costs, which eat into your retirement savings. Not only are you losing cash from your savings, but you’re also losing the interest that would have compounded on that money. Not to mention, with Medicare’s coverage of long-term care extremely limited, you’ve also lost three years of working and saving for unexpected costs such as nursing care.

The solution, for many, is simple: Avoid falling into the uninsured gap between retirement and Medicare eligibility. With life expectancy increasing, it makes sense to work as long as possible in order to save an adequate amount for retirement. Your retirement years will be more comfortable as a result, and you’ll enjoy greater peace of mind knowing you’re less likely to outlive your money.

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