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When You Retire, Prepare Yourself For This Cost

We’ve all heard the saying, “There’s no such thing as a free lunch.” It’s an adage that applies to many things in life – including Medicare.

If you’ve been thinking that the ‘golden years’ include relying on Medicare for cost-free health insurance, think again. Medicare’s out-of-pocket expenses can be significant, and oftentimes retirees haven’t planned ahead to cover these additional costs. But you can take steps to put yourself in a better position to not only anticipate these costs but to also better manage them.


Making Sense Of Medicare Costs

Seniors can expect to receive the basic form of government health insurance commonly referred to as “traditional” or “original” Medicare. Either name refers to coverage known as Medicare Parts A and B.

Medicare Part A covers some home health services as well as hospital expenses; generally, individuals aren’t required to pay any premiums for this coverage. Medicare Part B helps to cover the costs of exams, tests, doctor’s appointments, and the like. Individuals must pay a monthly premium for Part B coverage.

The numbers can help tell the story of how just how much Medicare can cost:  A retiree with an income of $88,000 or less should expect to pay a monthly fee of about $148 per month for their Part B coverage. In addition, copays, coinsurance, and deductibles will also need to be met.

According to financial expert Suze Orman, “…the average out-of-pocket cost for people at least 65 years old is more than $6,8000. And that’s just in today’s world. If you aren’t retiring for 5, 10, or more years…those costs will be even higher.”


Other Expenses And Plans To Consider

Medicare Parts A and B don’t cover prescription drugs, or vision, dental, and hearing services. As a result, many people choose to pay additional costs for private add-ons or alternatives provided under the umbrella of Medicare.

Additional Medicare options include:

  • MEDIGAP | Supplemental plan that can help with high out-of-pocket expenses.
  • PART D PLANS | Covers prescription drugs; can cost around $31 per month.
  • MEDICARE ADVANTAGE PLAN (Part C) | A privately-run plan that can require enrollees to pay up to $7,550 in out-of-pocket costs (as of 2021); traditional Medicare has no limit in terms of accrued costs.

Start Saving Now To Save Yourself Some Stress

Orman offers this straightforward advice: Start saving now. In order to be prepared to effectively manage upcoming Medicare costs, she suggests putting away 10% of your salary, or 15% if you’re financially able to. She also recommends investing through a Roth IRA, which offers both growth and qualified withdrawals – tax free. Roth IRAs are readily available, at brick-and-mortar banks, online, or through automated investing services.

“You will be so happy in retirement if you have a pot of savings that you can use without owing any taxes,” Orman says.


If putting aside and saving 10% of your income is too much of a financial struggle, Orman advises taking a look at your spending and considering scaling back on your “wants.”

“Every time you are considering a new purchase — be it furniture, a cellphone, a computer or a remodeled bathroom — ask yourself if you are paying only what is necessary to meet that need. Is a less expensive option available? What I see is that many households allow their spending to veer off to fulfilling wants more than needs.”

If you’re looking to rein in your spending or get the most bang for your buck, consider downloading a free browser extension that automatically searches the web for coupons and best prices each and every time you shop online. You can also check into trimming expenses by securing car and homeowners insurance policies that offer the coverage you need but at a better price than what you currently pay. Several websites allow you to easily compare policies, and see which one best fits your needs, your lifestyle, and your budget.