The Highest Medical Costs to Expect in Retirement:

Insurance Premiums:

For most individuals, eligibility for Medicare starts at age 65. If you retire before then, you will need to decide how to pay for health costs. During that period, “your biggest expense will be health insurance premiums for private coverage,” says Michael Botta, co-founder of Sesame, a health care marketplace, based in New York City.

If your employer provided health insurance coverage during your working years, you might be able to keep your coverage through the company’s plan. The Consolidated Omnibus Budget Reconciliation Act, or COBRA, is a law that allows workers and their families to continue their health benefits through a former employer’s group health insurance plan for a limited time after their employment ends. Typically, COBRA continuation coverage lasts 18 to 36 months after leaving the workplace.

However, COBRA coverage is often expensive, and companies with 20 or fewer employees legally may not need to follow COBRA guidelines. Other health coverage options include purchasing short-term insurance. This is a bridge, or temporary, plan that has a maximum policy period of 364 days. At the end of that time, you may apply for a new term of insurance. You can use this until you are eligible for Medicare, or you can take a part-time job that includes health insurance benefits.

Once you qualify for Medicare, you will still need to pay for premiums, deductibles and expenses that are not covered by your plan. Medicare Part A covers hospital care, Part B provides outpatient coverage and Part D includes prescription drug coverage. A Medigap plan can help cover out-of-pocket expenses related to Medicare. A Medicare Advantage plan, also called Medicare Part C, is an alternative to original Medicare with different prices, covered services and restrictions.

Home Health Assistance:

If you have a health condition that requires a higher level of monitoring – like post-stroke care, dementia or a recent joint replacement – you might have to pay for home health care, which usually involves a professional caregiver who provides health care in the comfort and convenience of a patient's own home. Home health care covers a wide range of services, including injections, therapy and wound care.

If you opened and contributed to a health savings account during your working years, you will be able to use those funds in retirement.

“HSAs can help retirees pay for medical expenses,” says Jesse Slome, director of the American Association for Long-Term Care Insurance in Westlake Village, California. “You may use your HSA funds, free of tax and penalty, to pay for Medicare Parts A, B, and D premiums.”

You might also contract for services related to housekeeping, cleaning, running errands and other activities of daily living. Assistants can help cover personal care like dressing, grooming and eating. The average salary for home health aides is $15.25 per hour, according to Indeed.com. However, depending on where you live and what services you need, the costs for home health services could be in the thousands for the course of a year.

Assisted Living:

If you decide to move into an assisted living facility, the related expenses will typically be paid out of your own savings. The older you get, the more money spent towards health care – and possibly long-term care – will be taken out of your retirement and investment accounts.

According to the Genworth Cost of Care Survey, the national median cost of an assisted living facility in 2021 was $4,500 per month, or $54,000 annually. You might put your home up for sale when you move into an assisted living center, which can help offset the costs.

Before you make a commitment to an assisted living facility, find out what specific services and care it provides, as this can vary greatly from state to state and facility to facility. While these facilities have evolved to include more medical services over the years, most still have limited clinical care, physician presence and registered nurses onsite.

Nursing Home Care:

A nursing home tends to provide higher levels of care than assisted living. You might transition from an assisted living center to a nursing home, or you may stay in a nursing home to recover from a surgery or hospital visit.

A private room in a nursing home costs an average $9,034 per month, according to a 2021 Cost of Care Survey by Genworth. Semiprivate rooms, which go for an average of $7,908 per month, are slightly more affordable. You might pay for these stays with your own funds or through long-term care insurance.

There are many different long-term care plans to cover expenses. For instance, some life insurance and annuity policies have riders where you can apply the death benefit toward long-term care expenses.

Dental and Vision Expenses:

Regular dental visits fall outside the scope of basic Medicare plans. Dental costs “can add up as one ages, particularly spending on crowns, root canals, dentures and tooth replacements,” Botta says.

Some Medicare Advantage plans include coverage for dental procedures.

Basic Medicare doesn’t cover routine eye exams, eyewear or contact lenses. However, Medicare will cover expenses related to some eye diseases and procedures. Some Medicare Advantage plans may provide assistance with routine vision care.Prescription Drugs:

You can purchase a Medicare Part D plan that will provide coverage for prescriptions. However, depending on the plan you select, some medications may have high out-of-pocket costs or not be covered.

“Prescription drugs can have high sticker prices,” Botta says.

Some sites – like SingleCare and GoodRx – offer coupons and discounts on prescriptions. Discount cards for prescriptions – such as America’s Pharmacy, Choice Drug Card, GoodRx Gold and ValpakRx – might provide additional ways to save.

“Choose a plan that covers the medicines you take currently, and consider what your future needs might be. If the plan you have doesn’t cover a particular medication, talk to your physician about a generic or alternative drug that might be available and covered,” says Dr. Charles Crecelius, a long-term care physician and post-acute care medical director at BJC Medical Group in St. Louis, Missouri.