You’ve retired and are enjoying the golden years of your life. You go for walks in the morning and jog in the afternoon. You tend to your garden and play a round of golf or pickleball whenever you want. Medical expenses are far from your mind.
But your annual checkup turned up something that merited more investigation. Several scans led to more tests and visits to specialists. Soon, you’re scheduled for surgery and continuous treatment. Your prescription medication is costing you more than $500 a year.1
The bills are starting to pile up. Then you realize that your lifetime of work and savings hasn’t prepared you for the medical expenses you’re facing now. Quite simply, you don’t have enough in the bank account or elsewhere to afford the help you need. So what do you do?
Fortunately, you have options.
What’s in this article
- How much do you need to save for healthcare during retirement?
- How can you save on medical expenses?
- How can you save on prescription drug costs?
- How can you save on your Medicare premium?
- What are other ways to save on healthcare costs?
How much do you need to save for healthcare during retirement?
You worked all your life. You regularly put money into your retirement account. You saved each month. But was it enough for unexpected medical expenses?How much you’ll spend in retirement
If you’re 65 or older, you’ll likely spend $4,345 monthly for living expenses like housing, transportation, healthcare, and food.2Your healthcare costs will make up an outsized portion of these medical expenses during retirement, ultimately totaling around $157,500, according to Fidelity.3
How much will you have saved by retirement?
How much you’ve put away for the day you stop working varies. But in 2022, families have squirreled away an average of $333,940.4
It’s a different number if you look at the median amount, which is right in the middle of all retirement accounts. Half of people have more than that number; half have less. The 2022 median is $87,000.5
Don’t forget that if you’ve paid taxes and earned 40 credits for working, you can expect some kind of Social Security payment each month. The 2024 average monthly benefit is $1,907.6
How much should you have saved for retirement?
The magic number to pay for everything after you hit 65 (or whenever you retire) varies as much as the weather. It depends on the lifestyle you want to live, where your home(s) will be, when you stop working, your health, and a host of factors you may or may not control.
But what benchmarks should you use to see if you’re on target to live comfortably in retirement or not?
One suggestion is to have 10 times your annual income put away by 67.7Another is to set up your money so you make a minimum of 75% of your pre-retirement income after you stop working.8A final way is to divide your yearly expenses by 4%. The assumption is that you can take that much out of your savings each year after retirement.9
How can you save on mdical expenses during retirement?
Your finances aren’t limitless, so how can you be a smart consumer and save on medical expenses? Fortunately, you have several options.Get to know your deductible (and out-of-pocket costs)
First and foremost, understand what you’ll pay if you get sick. Just because you’re on a $0 premium Medicare Advantage plan, doesn’t mean you won’t pay anything. You still have to pay your Part B premium ($174 in 2024).
Then you have your deductibles.
What’s a deductible? It’s what you have to pay before your insurance plan covers healthcare costs. That also varies depending on your plan.
You’ll also pay some share of medical costs (copayments, a set fee for each visit or coinsurance, a percentage of the expense).
Last and most importantly, you have to consider what your maximum out-of-pocket cost (MOOP) is.
What’s a MOOP? It’s the most you can pay for care for a calendar year.
For 2024, this number tops at $8,550 if you stay in your Medicare Advantage plans network and goes up to $13,300 if you go in or out of network.10
(Do these numbers worry you? If so, we discuss some options to help at the end)
Find free services
When it comes to wellness, free clinics offer you a way to save on going to the doctor for routine exams like checking your blood pressure. Where do you find free clinics? The National Association of Free & Charitable Clinics is one resource as is the “Find a Health Center” tool maintained by the Health Resources and Services Administration.
Use telemedicine
When you’re not feeling well, skip going to the doctor. Instead, chat with your doctor by video. Follow-up visits? Use telemedicine for that too. It’ll save you time and the expense of driving to your doctor.11Plus, you’ll get help as soon as you need it without waiting for an appointment to open up.
Fees for telemedicine visits are cheaper than in-person visits. A 2017 study found telemedicine visits were almost half the price ($79) than in-office visits ($146).12
Get ahead of any illness
The best way to treat any illness? Identify it early. Keep those little problems from becoming bigger ones.
To begin, schedule your “Welcome to Medicare” preventive visit. Your doctor will review your medical history and share about preventive services available to you.
Then make sure to take advantage of your yearly wellness visit after that.
How else do you stay ahead of getting sick? Get your vaccines. The American Academy of Family Physicians recommends getting your influenza and pneumococcal vaccines because they can prevent “life-threatening complications.”13
Next is a list of suggested screenings, breast, colorectal, cholesterol, diabetes, blood pressure, and osteoporosis, to catch any conditions or diseases more common in older adults.14(For a full list of screenings covered by Medicare, go here).
Lastly, keep a healthy lifestyle, which you’re probably already doing. Exercise. Eat a mix of fruit and vegetables combined with whole grains, lean meats, and healthy oils. Choose goods with low sugar, fats, and sodium.
The U.S. Department of Agriculture also recommends focusing on nutrients you need, including potassium, calcium, and vitamin D, along with plenty of water.15
How can you save on prescription drug costs?
Prescription drug costs can easily exceed your estimates and expectations, leaving you with a bigger hole in your wallet. But, you can mitigate this in a few ways:First, enroll in Medicare Part D for drug coverage. You’ll pay an average of $55.50 a month (the CMS Part D premium average) for a plan that should cover your medication.16Also, and this is important, don’t automatically renew your plan. Make sure to shop around each year and see if you can get a better price and plan.
Second, opt for generic medicines. Doing so can save you 75% off what you might have paid if you opted for the name-brand drugs.17If you have to go with a brand-name drug, see if the manufacturer offers coupons or patient assistance. You could end up paying much less than what was initially charged.
Lastly, opt for a longer supply of medicine and ask your doctor for a prescription for the bulk amount. A 90-day supply of medicine can end up being cheaper than three 30-day refills.18
How can you save on your Medicare premium?
You might be paying a “penalty” on your Medicare premiums based on what you made from the last two years. That penalty is the “income-related monthly adjustment amount” or IRMAA.If you were a high-earner and made more than $103,000 a year, you’d be paying more for your Medicare plan (Parts B and D specifically).19
If your income has fallen after you retired, or if you had other life-changing events like marriage, divorce, or the death of a spouse, you can appeal your IRMAA and get it adjusted.20
What are other ways to help with healthcare costs?
It might seem like medical expenses are impossible to get a grip on. But there are other ways you can help yourself and your finances.Take a look at your budget and see if there’s anything you can pause or cut. Do you subscribe to anything you’re not watching or reading? Consider pausing or canceling them altogether.
Could you eat out a little less and cook more often? That’s also another way to save on food.
Worried about your out-of-pocket costs with Medicare Advantage, especially if you get sick or hospitalized? Consider adding some peace of mind in the form of supplemental health insurance. These plans augment your existing plan, kicking in only during certain situations. For instance, critical illness insurance pays you a lump sum amount if you get seriously ill. A hospital indemnity plan also provides a one-time payment should you end up in the hospital. These kinds of plans provide a little more elbow room financially to handle medical expenses.
Next Steps
You worked so hard to get to retirement. You should be enjoying this time in your life, not worrying if your savings will meet your medical expenses. The situation’s not impossible, and you have options to overcome it.
