Ah, retirement—the golden years—you’ve finally reached the point in your life in which early mornings, long commutes, impossible bosses and 10-hour work days are a thing of the past. It’s like summer vacation, but better, because you know that this period of relaxation and stress-free days will never end…right?
Not the Golden Years You Had Planned
Lately, it seems like the closer some individuals and couples come to retirement, the more stressed they become. According to Wells Fargo Private Bank Manager Katherine Dean, some individuals spend anywhere from $5,000 to $15,000 a month on their medical expenses. And according to the Employee Benefit Research Institute, that’s not abnormal; most couples 65 and older should expect to pay close to $220,000 in out-of-pocket expenses during retirement—and that’s not including long-term healthcare, nor does it take into account the annual inflation rate for medical expenses of 5% to 7%.
Many people don’t take their retirement healthcare expenses into account because either a) they are unaware of the actual costs of healthcare, or b) they believe that Medicare will cover everything. However, when it comes time to retire, these same individuals realize that not only does Medicare NOT cover all of the costs of medical care, but the actual costs will eat up far more of their retirement funds than they’d planned and they will be unable to care for themselves on the level they’d anticipated.
Less Demand + Higher Costs = An Uncertain Future
So why is this happening? Shouldn’t everyone be insured under their employers even after retirement? While it would be nice if this were the case, and while EBRI’s estimates assume that the individuals who will be most affected by high out-of-pocket healthcare costs don’t have employer-provided retiree health benefits, the fact of the matter is that fewer and fewer private sector employers are offering retiree health benefits.
In 1997, the percentage of non-working retirees over the age of 65 with retiree health benefits was already a staggeringly low 20%; by 2010, that percentage had fallen even more, to just 16%. Many employers don’t feel obligated—nor are they required—to provide retiree health benefits unless they specifically promised to do so. And even if they promised to provide some sort of retirement health coverage, unless they promised a specific benefit or benefits, they have the freedom to make changes to the programs as they see fit.
That being said, even the employers who still offer retiree health benefits are tightening their purse strings exponentially; premiums are skyrocketing, eligibility is becoming harder and harder to obtain, and—once an individual finally jumps through all the hoops—the benefits waiting for them at the finish line can be extremely limited.
According to Fidelity Investments, one of the reasons that lifetime healthcare costs have risen to the point that not even a lifetime’s worth of Medicare savings can cover them—and the reason that high group plans are forcing employers to opt out of providing coverage for their employees altogether—is that, once the 2008 recession hit, people stopped seeking medical treatment. Unlike housing, food or other basic needs, healthcare—except in instances of serious illness or injury—just hasn’t been a high priority.
After five years of putting off the “luxury” of healthcare, it’s no surprise that the results of a Fidelity Investments poll revealed that individuals between the ages of 55 and 64 believed they would only need $50,000 to pay for healthcare costs in retirement—even though estimates have been more than $200,000 since 2006. As the executive vice president of Fidelity Benefits Consulting, Brad Kimler, put it, many Americans drastically underestimate healthcare costs, and are therefore left vulnerable in their later years when they don’t incorporate them into their overall retirement plans.
It’s Never Too Late to Start Saving
There are a few steps you can take to ensure that your retirement years are as golden as you’d imagined they would be. The first is being more aware of the high costs of healthcare. By acknowledging the fact that healthcare is expensive, and that you WILL utilize it in your retirement whether you plan to or not, you can better prepare your finances for your later years.
The next step is to estimate what your medical costs will be and incorporate them into your budget. If you know your family history, you can make judgment calls on what procedures you might need in the future, what medications you will need to take, the amount of health maintenance you’ll want to factor in, etc.; then you will be able to more accurately incorporate all these costs into your financial plan. You should probably even account for inflation over the next 20 years or so. Once you’re way ahead of the game, you can start looking for a health insurance plan that covers a good portion of what you think you’ll need.
Around this time is when speaking with a licensed, expert insurance professional like those at MediGap Advisors can provide some major relief. We know all this planning and strategizing can be daunting, but we feel confident that our complimentary consultations will help you put things in perspective and lead to finding the perfect health plan for your personal situation just as we have happily done for so many other customers over the years.
We take great pride in easing the worry our customers sometimes feel when planning such important considerations as how soon you want to retire, how long you hope and expect to live, what your current health status is, the cost of medical care in the area in which you live now as well as in the area where you plan to retire, whether you will be receiving employer-provided benefits, and, again, how much inflation will factor into your finances.
In the end, the best thing you can do for yourself and your spouse is to simply be as prepared as you can be. As long as you take your healthcare seriously—and don’t wait until you start receiving doctors’ bills to start planning!—you should be fine…especially with MediGap Advisors at your side to help!
Here are some other alternatives that you might wish to consider:
Long-Term Care Insurance: Hopefully long-term care won’t come into play during your retirement, but some experts such as the CEO of Fragasso Financial Advisors, Bob Fragasso, suggest there is a 50% chance that you will indeed need it at some point. If you don’t plan for it and you end up needing it, that’s another $50,000 to $100,000 a year for up to five years you’ll be looking at spending out-of-pocket. Financial advisors often don’t recommend you add long-term care to your plan since the premiums are so high, but if you already have it, keep it!
Health Savings Accounts: If you have a few years before you turn 65, HSAs are another great option to think about. Not only are they tax-advantaged, but once you retire, you can continue to contribute to them until you qualify for Medicare or another plan. Yearly contributions are limited to $3,250 for single coverage and $6,450 for families; BUT, whatever funds you don’t use will remain in your account, and you will be able to add to them the following year, and the years after that, so that you can prepare for healthcare costs and perhaps long-term care later on. Another great advantage is that YOU own the account—not an employer—and no matter what, it will be paired with a high-deductible health plan. That way you’re saving even more money in the long run.
Preparing for retirement in today’s economy isn’t easy, but our goal is to make the process as uncomplicated for you as it can possibly be. We’ll help you compare numerous plans, show you how to combine plans to your advantage, and make absolutely sure you find coverage that will keep you strong and healthy throughout your retirement.
At MediGap Advisors, we want your golden years to be just that—golden. Visit us at our website to see all the ways we can save you money and ease your mind so that all you need to focus on is maintaining your good health!

Wiley Long is founder and president of Medigap Advisors, and is passionate about helping people navigate the confusing waters of Medicare. He is the author of The Medicare Playbook: Designing Your Successful Health Coverage Strategy, a clear and simple explanation so you can make the most of your Medicare coverage. For more information visit www.MediGapAdvisors.com.