Managing Your Health-Care Costs During Retirement

By David Leto

| Photographs By Rawpixel Ltd

For many Americans, especially those suffering from chronic illness, health care ends up being the most expensive part of your budget. For retirees, or those who are looking to retire soon, there is a lot of anxiety over unexpected health issues that could bring a large financial burden with them. 

It is worth your time to manage your health-care budget carefully, so you know what to expect, and are prepared when sudden or unexpected costs arise.


Let’s talk about Medicare first. The biggest misconception people have with Medicare is that once you qualify for it, your health-care costs disappear. It is certainly portrayed that way in the media at times, but in fact Medicare does not cover everything.

The average couple will still end up paying over $200,000 in health-care costs from the age of 65 on, including the Medicare premiums. What Medicare is good for is covering the basics. It is similar to buying an economy-class seat on an airplane. You will get where you need to go, but the first-class lounge seems a lot comfier. Things Medicare will not cover include routine dental work, cataract surgery, newer drug treatments, state-of-the-art medical care, and more personalized medical care. 

The cost for specialized drugs can be expensive as well, even with Medicare covering most of the tab. Many cancer drugs and drugs necessary for multiple sclerosis can reach into the tens of thousands of dollars.

You can still choose to keep private insurance along with your Medicare, to help mitigate some of the costs, but there is simply no denying that health care is expensive. Even a couple who has Medicare and private insurance can expect to pay upwards of $20,000 a year from the age of 65 on.

How Do You Pay for It?

One way to prepare for the costs of health care after retirement is to open a health savings account or HSA. HSAs are a great way to save money that will be used for medical expenses thanks to a triple-tax-free feature. 

As long as the money is used for medical expenses, a person who owns an HSA can add money to his account tax-free, grow the money tax-free, and withdraw the money tax-free.

There are yearly maxes you can contribute to the account – $3,400 for a single person, $6,750 for a family, and those 55 and older can add an extra $1,000 per year. The sooner you start one the better, as the money can grow tax-free.  

HSAs are ideal ways to confront sudden and unexpected medical expenses, such as a loved one’s getting injured in a car wreck, or a new illness. The caveat with HSAs is that they usually are paired with a high deductible, so your yearly health-care costs can remain quite high. Ideally those costs are paid with funds outside of the HSA, so the money inside of it can continue to grow.

Find Low-Price Options

Many health-care experts recommend searching out low-price options for treatments. You can find similar treatments for wildly different price points. For example, an MRI in a hospital can cost you up to $3,000 while the same service would cost $300 at a stand-alone clinic.

Participating in trial cases is another way to save money. Drug companies are always looking for clinical trials to test their new products, and you can get potentially effective treatment and drugs for a fraction of what you would pay otherwise.

Your overall health is as much a factor in your health-care costs as any chronic illness. Eating healthfully and getting regular exercise will keep you away from the doctor more than any miracle drug.

Mental stimulation is also an important part of your health, as consistent mental exercise prevents dementia, which is one of the biggest costs in long-term care. A lack of social inclusion, or deteriorating mental and emotional health, can contribute to higher levels of stress and anxiety. 
This only serves to complicate and worsen existing medical issues. Making sure you are taking care of yourself mentally and physically, even as you age, will give you the best chance at avoiding an outrageous hospital bill.


Planning for health-care costs during your retirement is not the most glamorous task around, but it is necessary. Costs continue to go up and it doesn’t seem as if Congress is going to find a solution anytime soon. Still, if you plan ahead you should have no problems meeting the costs of health care during retirement.

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