Cost of Healthcare in Retirement

Managing Healthcare Costs surgeon in operating room.

As one of the largest expenses, many worry about the cost of healthcare in retirement. Our guide helps you find ways to pay for it.

By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC®:

Many people are concerned about how the cost of healthcare in retirement will affect their ability to keep the money they have.  This is not surprising since healthcare is likely to be one of the largest expenses you’ll have in retirement.

According to a Nationwide survey, an astounding 73 percent of respondents say one of their top concerns in retirement is paying for healthcare costs.

It’s not surprising so many people nearing retirement are concerned. Only a fourth claim to have discussed their concerns with an advisor. Most claim they haven’t broached the topic because they feel it’s too personal to discuss with others.

Most people remain tightlipped about their healthcare needs in retirement. Despite this, 78 percent expect their advisor to provide planning advice that includes healthcare costs. This is why you need to discuss your retirement healthcare needs with your financial advisor. Your advisor can help you work through many different scenarios for covering costs including Medicare and HSA plans.


According to the Nationwide survey, 90 percent of older adults plan to use Medicare for their healthcare needs when they retire, but most admit they don’t know what it covers.

Medicare coverage is designated using a variety of letters. The biggies are:

  • Part A which covers major medical and inpatient care
  • Part B which covers doctor’s visits and outpatient care
  • Part D which covers prescription drugs

Medicare Part A coverage is free as long as you qualify for it. Though the bulk of Medicare is not free.

What to consider

Moreover, the more money you make, the higher your Medicare Part B and D premiums will be. But there are options to offset these costs. Some things to consider when selecting the right plan:

  • The “original Medicare” plan consisting of parts A and B does not cover deductibles, copays, coinsurance, most dental care, most prescriptions, routine eye and hearing exams, fitness programs, or service outside of the United States.
  • Distributions from HSA accounts, Roth IRA accounts, cash value life insurance policies, and income from reverse mortgages don’t count in the formula that determines your Part B premiums.
  • If you go with Medigap supplemental insurance to cover deductibles and co-payments, shop around as the prices vary wildly.
  • You may want to purchase an all-in-one Medicare Advantage plan. Though you may have a limited provider network, you may save on premiums over purchasing Medigap and Part D plans.
  • More important, you’ll want to enroll when you are first eligible or face late-enrollment penalties, even if you are still working at age 65. Plus, there are deadlines and eligibility dates for making changes. Your advisor can help you keep track of these.

HSA Plans

HSAs are similar to individual retirement accounts. Both employers and individuals can contribute pre-tax dollars for eligible individuals. Distributions are tax-exempt provided they are used for qualifying medical expenses. Additionally, HSAs do not have to be spent in the current calendar year, so the balance can be carried over indefinitely.

According to the Nationwide survey, 65 percent of workers are not using their HSA as an investment vehicle. Money in an HSA can be invested in stocks, bonds, mutual funds, certificates of deposit, and other similar investments. What’s more, to offset the cost of healthcare in retirement, HSAs offer a triple tax benefit:

  • Funds are deposited pre-tax
  • An HSA’s growth is tax-free
  • Distributions are tax-free as long as they are used for qualifying medical expenses


To take advantage of an HSA, you must meet several conditions. Here are the eligibility requirements for 2019:

  • Be covered under a high-deductible health insurance plan
  • Self-only coverage must have an annual deductible of at least $1,350 and annual out-of-pocket expenses not to exceed $6,750
  • Family coverage must have an annual deductible of at least $2,700 and annual out-of-pocket expenses not to exceed $13,500
  • A plan may not pay benefits other than preventive care until the insured or insured’s family has incurred covered medical expenses over the annual deductible each year
  • You may not be covered by any other health insurance plan that is not a high-deductible health insurance plan, including a spouse’s or parent’s plan and Medicare
  • The insured may not be claimed as a dependent on another person’s tax return


Contributions for 2019 may be made up to $3,500 for self-only coverage and $7,000 for family coverage. If you are age 55 or older, you can contribute an additional $1,000 to an HSA. Additionally, contributions can be made for the previous year until April 15, similar to an IRA. You may also fund an HSA through a one-time, tax-free rollover from a traditional or Roth IRA.

Some of the qualified medical expenses include:

  • Medical plan deductibles
  • Long-term care insurance premiums
  • Diagnostic services
  • Some nursing services and drugs that require a prescription, though some over-the-counter drugs can be reimbursed if a prescription is obtained
  • COBRA healthcare continuing coverage or insurance coverage while receiving unemployment benefits
  • Premiums for Medicare Part B -medical coverage for doctor’s care and outpatient services, Part D – prescription drug plans, or Part C – Medicare Advantage plans

There are many intricate options like coordination with Medicare, excess contributions, and transfers through death or divorce, so it is wise to seek the advice of your trusted financial advisor to help you determine the best options for your personal situation.

Other Financial Options to Offset the Cost of Healthcare

There are other options to help you cover the cost of healthcare in retirement. For instance, long-term care and other insurance policies can help cover the cost of in-home care. These policies come in many different sizes and options.  Also, you’ll likely have access to social security benefits and IRA distributions as part of your overall income. Your advisor can help you create personalized healthcare cost estimates, recommend funding sources, project your savings needed to cover those costs and work through the best tax-reduction options for your situation.

With so many options available for paying healthcare needs in retirement, it’s important that you share your healthcare needs with your advisor, even if they are embarrassing to you. When your advisor has a full understanding of your unique situation, they can help you create a plan that will specifically meet your needs, and help you keep more of your money in retirement.


Kris Maksimovich is a financial advisor located at Global Wealth Advisors 4400 State Hwy 121, Ste. 200, Lewisville, TX 75056. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Financial planning services offered through Global Wealth Advisors are separate and unrelated to Commonwealth. He can be reached at (972) 930-1238 or at

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© 2018 Global Wealth Advisors

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