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Preparing for the Cost of Health Care in Retirement

Health care costs for retirees are at an all-time high. Here's what you can do now to be financially prepared.


Soon-to-be retirees can expect to spend more than $377,000 on health care in retirement, according to HealthView Services' 2016 Retirement Health Care Costs Data Report. Retiring in 10 years? Then you can expect to put 88 percent of your lifetime pretax Social Security benefits toward health care costs (compared to the 57 percent that retirees pay today).

While those numbers may sound scary, with some smart planning—and the expert advice below—you can ensure you'll be able to comfortably cover your health care costs in retirement.

If you plan to retire at age 65 or later
"Planning at this age is easier because your costs are more fixed, thanks to Medicare eligibility," says Ash Toumayants, founder of Strong Tower Associates, based in State College, Pa. To get an idea of what Medicare coverage you would sign up for once you retire, and what that coverage would cost, visit medicare.gov.

Keep in mind that changes to Medicare are likely on the horizon. Still, looking at your Medicare plan options now, and estimating your monthly costs, is a smart move. Once you have that ballpark number, speak with your financial advisor about retirement planning options that could help support that expense.

If you plan to retire before 65
If you're giving up the 9-to-5 grind before your 65th birthday, you'll need to get coverage until you become Medicare eligible. Some employers allow you to stay on your current insurance plan after you stop working, while others offer health insurance for their retirees. Talk to your HR department now about your future coverage options and what your financial contribution would be for each.

If your employer doesn't offer additional insurance, you'll need to buy it on the health care exchange. Numbers vary per state, but Toumayants, who is based in Pennsylvania, tells his clients to expect to pay about $1,000 a month per couple for a plan that allows for $12,500 maximum out of pocket expenses per year.

If you and your spouse jointly make under a certain amount per year, you could quality for a subsidy, lower out-of-pocket costs, or even Medicaid. Those numbers also vary by state, but you can determine your eligibility on healthcare.gov/lower-costs/qualifying-for-lower-costs.

Keep in mind, there is a loophole in qualifying for assistance. "Assets aren't factored into the equation," says Toumayants. "They only consider income."

So if you could live off of the money in your savings, and keep your income on your tax return under that threshold, you could be eligible for subsidies and lower out-of-pocket health care costs. That might mean directing your savings efforts now into a non-retirement account to pay for your living expenses in the pre-Medicare years. You should weigh the pros and cons of this approach with your financial advisor to determine whether this would be the best move for you.