For retirees, Medicare is often considered the go-to solution for healthcare coverage. But there’s more to consider than just signing up for Medicare. The true cost of healthcare in retirement is layered, including premiums, out-of-pocket expenses, and factors tied to lifestyle, income, and personal health. Let’s discuss some important aspects of healthcare spending you need to plan for when you stop working.
A Positive Attitude May Just Save You on Healthcare
It may sound simple, but maintaining a positive attitude as you age can have a significant impact on your healthcare expenses in retirement. Research shows that individuals with a more optimistic outlook on aging often experience better health outcomes and, subsequently, lower healthcare costs. Positive views on aging are linked to reduced risks of chronic illnesses, improved mental health, and even longevity.
It’s all connected: when you believe in the possibility of health and vitality as you age, you’re more likely to have healthy habits and feel empowered to take care of yourself. So how does this affect the wallet? When you’re healthier overall, you’re less likely to need frequent doctor visits, prescription drugs, and expensive treatments, which can add up in retirement.
Income-Related Monthly Adjustment Amounts: The Real Cost of Higher Income
If your income in retirement is on the higher side, Medicare will adjust your premiums accordingly, thanks to Medicare IRMAA brackets. The Income-Related Monthly Adjustment Amount is an added premium for those with Medicare Part B and Part D. These brackets apply to individuals with a Modified Adjusted Gross Income (MAGI) over a certain threshold, meaning you could be facing additional monthly costs based on income reported from two years ago.
Understanding Medicare IRMAA brackets is critical for anyone approaching retirement with investments, pensions, or other sources of income. The surcharge can range significantly, adding hundreds of dollars monthly to your standard premiums. For retirees living on a fixed budget, IRMAA can feel like a surprising cost. It’s important to plan for this by assessing your projected retirement income and determining if and when you might fall into higher IRMAA brackets.
Long-Term Care: The Big Expense That Medicare Won’t Cover
One of the most significant costs retirees might face is long-term care, an area where Medicare falls short. Long-term care includes assistance with everyday activities like bathing, dressing, and eating, whether provided at home, in assisted living, or in nursing homes. It’s estimated that nearly 70% of retirees will require some kind of long-term care, which can quickly drain retirement savings without careful planning.
Because Medicare does not cover long-term care, retirees must explore other options to fund these services. Some options include purchasing long-term care insurance, creating a dedicated savings fund, or using hybrid policies like those that combine life insurance with long-term care benefits. For those with enough resources, self-funding may be an option.
Prescription Drugs: The Ongoing Cost of Medication in Retirement
For many retirees, prescription drugs are an ongoing expense that can take a substantial bite out of their monthly budget. While Medicare Part D covers some prescription costs, out-of-pocket expenses can still be significant, particularly for high-cost medications or those that require ongoing treatment. Medications for chronic conditions including diabetes, heart disease, or arthritis may require regular refills, meaning these costs add up quickly over time.
To plan effectively, take a close look at your current and expected medication needs, and estimate what they may cost over the years. This could include reviewing Part D plan options, as well as looking into additional coverage like Medigap plans, which help cover certain out-of-pocket costs.
Dental, Vision, and Hearing: The Forgotten Costs of Health
Another often-overlooked healthcare cost in retirement is coverage for dental, vision, and hearing needs. Traditional Medicare does not cover these services, yet they’re important aspects of overall health as we age. From routine cleanings and new eyeglasses to hearing aids and more complex procedures, these costs can quickly go up if not accounted for in your retirement planning.
To bridge this gap, consider supplemental insurance plans designed for dental, vision, and hearing coverage, or budget for these expenses separately. It’s common for retirees to need dentures, hearing aids, or more frequent eye exams and eyewear as they age, and these items can be costly.