5 ways to save on retirement healthcare costs


Healthcare is already a significant part of many people’s expenses in retirement, and costs are rising. The average couple retiring in 2015 could plan on spending $245,000 on healthcare, according to Fidelity. This represented an increase from $220,000 in 2014, and a 29 percent increase since 2005. Here are some ways to save on healthcare in retirement.

Healthcare is a looming expense for many retirees. This short video describes the issue.

Medicare plays a big role in most retirees’ healthcare. But Medicare pays only part of your total healthcare costs, and your actual costs can vary widely depending on which Medigap and other plans you select. Here are some suggestions for saving on Medicare and other retiree healthcare costs.

1. Minimize Medigap costs. Medicare covers about half of total healthcare costs in retirement, but there are premiums and co-pays. You will want to look into various options that are appropriate for you to cover these out-of-pocket costs.

There are ten standard types of Medigap plans, labeled A through N. Regardless of which company sponsors a plan, it must offer the standard benefits for that plan type. The Medicare website shows the basic features of each plan type and the coverages it offers. The most comprehensive is Plan F, which covers 100% of out-of-pocket expenses including co-pays, premiums, deductibles, and excess charges, for Medicare-approved treatment. Plan N, the newest plan type, is almost as comprehensive and covers everything except for Part B deductibles, Part B excess charges, and doctor visit and emergency co-pays.

Medicare Advantage plans are another way to cover out-of-pocket costs for Medicare treatments and prescriptions. Although switching plans can involve some paperwork and a medical exam, it may be advantageous to you. You can sometimes changes policies without a medical exam, and get a lower premium in exchange for fewer benefits.

For assistance in finding a Medicare plan, visit the Medicare website.

2. Contribute to a health savings account. If you have not signed up for Medicare, you can contribute to a health savings account with pretax dollars. The funds in the account grow tax-deferred until you withdraw them, and the withdrawals are tax-free if used for medical expenses. If you have signed up for Medicare, you cannot contribute to a HSA but you can make withdrawals.

3. Take advantage of employer-sponsored healthcare plans. If you’re still employed, you may want to hold off on enrolling in Medicare so that you can continue to contribute to a HSA for future use. The federal government, and many state and local governments provide healthcare benefits to retirees, as do some larger companies.

The amount of coverage varies by organization. In 2010, companies that offered health benefits to retirees contributed about $1,800 toward medical insurance and healthcare costs for retirees age 65 and older and $3,600 for retirees under age 65. You will want to consult your employer’s healthcare administrator for details about retiree benefits and keep in touch with them regarding any changes. Increasingly, agencies are offering HSAs instead of employer-sponsored healthcare plans. Additionally, the plans and amount of retiree benefits offered by the employer may change in the future.

4. Save on prescription drugs. Americans spent an average of $1,370 per year on prescription drugs in 2013 and 2014. But not everyone spends the same amount. The top 5% of consumers accounted for 61% of the drug expenditures.

If you are on prescription drugs, you may be able to save significantly by purchasing generic drugs instead of brand-name. Around 80% of prescription drugs have generic equivalents that save an average of 500% over brand-name versions.

You can also look into buying a higher dose and splitting the pills. For example, 100 mg doses of a drug may cost just a little more than 50 mg doses, so if you need 50 mg doses you might try purchasing 100 mg doses and splitting the pills.

It also pays to compare different pharmacies as prices can vary between pharmacies. Your healthcare plan may have preferred pharmacies with lower prices. Many pharmaceutical companies also offer assistance to consumers with financial hardship.

5. Stay healthy. Perhaps the best way to save on healthcare costs is to need less healthcare. Eating a healthier diet and exercising regularly may result in higher expenses now but can pay off later in lower costs for chronic healthcare and prescriptions and lower premiums, and a better quality of life.


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