How Do Medical Expenses Impact Retirement Savings?


As people head into retirement, many believe Medicare will cover their health care expenses. It is a health care benefit people pay into during their working years and is part of their retirement plan. Research shows, however, that senior health care can be significant. Learning what those costs are and how to protect yourself is important.

On average, a retiree can expect to pay $122,000 out-of-pocket for health care expenses that Medicare or insurance doesn’t cover. Some will have even higher expenses. Out of all seniors, 5% will face out-of-pocket medical bills of more than $300,000; 1% more than $600,000. For an older adult living on a fixed income, that can take a big bite of their budget.

It’s important to be aware of the health care-related expenses your Medicare Part A and B benefits won’t cover. Some, such as whether Medicare pays for assisted living, are surprising to older adults.

A few of the most common health care expenses Medicare doesn’t cover include:

  • Prescription drugs
  • Assisted living
  • Long-term care (aka nursing home care)
  • Deductibles and co-pays
  • Routine vision exams
  • Hearing aids
  • Dental care
  • Acupuncture
  • Most chiropractic care

If your retirement plans include travel outside of the country, it’s important to know Medicare will not pay for any potential health care expenses. You’ll need to purchase a separate health care policy before your trip.

What else can you do to protect your retirement savings from catastrophic senior health care expenses?

We have a few suggestions for you to consider.

Protecting Retirement Savings from Senior Health Care Expenses

  • Get drug coverage: You’ll need to buy a Medicare Part D prescription plan or elect a Medicare Advantage plan that includes prescriptions. Doing so will protect you from the rapidly escalating costs of prescriptions.
  • Shop around for drug prices: Another tactic that can help you save on health care expenses is shopping around for prescriptions. Sites like GoodRx make this much easier. Just enter your zip code and prescription information and the site will locate pharmacies with the best prices.
  • Look into Medigap insurance: You should also consider purchasing Medigap insurance. This private insurance helps cover some expenses not paid for by traditional Medicare. The Centers for Medicare & Medicaid Services created Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare to help you find a policy.
  • Carefully review health care bills: It’s an unfortunate reality that health care providers make billing errors, some more than others. It’s important to review and question every bill you receive. If you have any questions, call the provider. Be sure to take good notes after your conversation.
  • Consider long-term care insurance: Depending on your age and health, you might be able to purchase a long-term care insurance policy even after you retire. Many seniors mistakenly believe these policies only pay for nursing home care. In reality, many also cover assisted living care and some in-home care expenses.

Finally, you may qualify for other avenues for financing assisted living or nursing home care. An experienced senior care advisor can help you explore alternate options for financing assisted living care or a nursing home.

From special benefits for qualified veterans to life settlement funds, there may be options to help when the need for more care arises. Call us at 888-514-6461 to speak with a senior care advisor for free.