Will Healthcare Costs Crack Your Nest Egg?

Retirement can be expensive – upwards of $200,000 a couple -- just for healthcare

Updated on: April 27, 2020

Originally posted on: August 11, 2014
Express Scripts Medicare Advisor
Ms. Kyong specializes in personal finance issues for Medicare recipients. Topics include managing healthcare costs in retirement.

It’s a scary number: A couple retiring this year will need $280,000 to cover their healthcare expenses in retirement, and that’s excluding long-term care.

Living longer is a good thing, but it can be expensive. Life expectancy is 78.6 years in the U.S., so planning for retirement is very important to make sure you are prepared for the next chapter in your life. This includes preparing a nest egg that can be adjusted for the many years ahead. Planning for healthcare needs is more critical now than ever.

Estimating Your Healthcare Costs

The first step in planning is to estimate your future healthcare costs. You can use the estimate of $280,000 as a baseline. You should also think about your current health, family history, and lifestyle habits. Factors like regular exercise or smoking can have positive and negative impacts on your future health. If it’s more likely that a chronic health condition is in your future, you may need more savings for retirement.

Costs of Common Conditions Associated with Aging

  • People living with diabetes can expect to pay $16,750 per year on medical expenses.
  • The yearly medical costs of adults with high blood pressure can be almost $2,000 more than for people without the condition.
  • An average cancer drug can cost $10,000 per month while some cancer drugs can cost $100,000.

If you’re insured, many of these treatment expenses will likely be covered, so the next step in planning for your future is to understand your coverage options.

Considering Your Healthcare Coverage Options

As fewer employers offer retiree healthcare benefits, it’s likely your coverage will be through Medicare once you reach age 65. Familiarize yourself with your Medicare options. Medicare Part A covers hospitalization and Part B provides coverage for medical needs, such as doctor visits; Part D covers prescription drugs; or you can use a Medicare Advantage Plan offered through a private company that combines Parts A and B and sometimes bundles Part D into one plan for greater convenience.

Part D Enrollment: What You Need to Know

Part D enrollment is different from Original Medicare. With Original Medicare, you are automatically enrolled when you turn 65 if you already receive benefits from Social Security or the Railroad Retirement Board. For Medicare Part D, you will need to choose and enroll in a plan.

The Medicare Part D plan you select can make a big difference in your costs over time. Make sure to choose one that covers the medications you need now ― but also consider what you may need in the future. Look for a plan that includes support from specialist pharmacists who can help you adhere to your medication program if you develop a chronic condition.

Remember: The right Part D plan can help stretch your retirement dollars. The wrong one could crack your nest egg!