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Retirement Healthcare: What Are the Options Available to You?

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For those eagerly anticipating their after-work life, planning is the only medium to ensure you live the life of your dreams. Apart from wisely planning investments, you also need to cautiously and comprehensively arrange for retirement healthcare. Medical costs are likely to increase as you age and could cause a severe dent on your retirement savings. If you wish to retire early, the costs can further double up, owing to hefty premiums and the absence of a strong healthcare plan.

As per the HealthView Services report, a healthy retiree at the age of 55 can expect to spend on average $13,165 in annual medical costs when they attain the age of 65. The cost goes further up to $16,635 in case the retiree has a medical condition such as diabetes. With such hefty healthcare costs, an individual should plan his or her retirement healthcare with extreme prudence. Here are some options for retirement healthcare:

Health Savings Account (HSA)

HSA can prove to be a very beneficial healthcare fund provided it is initiated early in life. It allows the investor to make tax-deductible contributions every year which can be used for current, as well as future medical expenses. HSA is not simply a regular savings account; though initially, it begins as one and also fetches interest like a savings account. But post attainment of a certain limit, HSA can be converted to an investment account. This allows you to grow tax-free money by investing in mutual funds, ETFs, and stocks, etc. But a noteworthy point here is that HSA savings growth and gains are tax-free only if they are withdrawn for medical purposes. For all other non-medical withdrawals, there will be tax along with a 10% penalty if the action is initiated before the official retirement age of 65. The limit for an individual HSA contribution is $3,550 and for a family is $7,100, and for those who are 55 years or older, an additional contribution up to $1,000 is allowed. You can participate in an HSA plan funded by the employer or have a separate plan altogether. For the former, there are companies who make a contributory share and deduct the employee’s contribution from the pre-tax pay-checks.


For retirees, Medicare is another option that can ease the brunt of retirement healthcare costs. Medicare is a federal program that sponsors hospital and medical care for seniors above the age of 65 or those disabled before the retirement age. However, the person concerned must have completed at least ten years of full-time employment. Medicare involves contribution from the employer at 1.45%, and an equivalent percentage from the employee on the first $200,000 of individual income, $250,000 for joint returns, and $125,000 for married taxpayers filing separately. However, a person becomes eligible for Medicare only if he/she is retiring at or later than the age of 65. Medicare comprises of four parts, each of which covers certain expenses:

  • Part A: Free cover for hospitalization, skilled nursing facility care, hospice, etc.
  • Part B: Outpatient procedures including lab tests, doctor’s appointment, certain surgeries, mental health care, as well as medical equipment, etc.
  • Part C: Allows individuals to enroll in private health plans, associated with Medicare
  • Part D: Prescribed drugs

    You can choose the part you see fit and accordingly pay for the premiums to receive benefits after retirement.


    For people who have a limited income, a Medicaid cover can be a very beneficial plan to pay for retirement healthcare expenses. A Medicaid program is run in cooperation by the federal government and the state. Eligibility for each state differs, but most people above the age of 65 or older who meet the income and asset limits are eligible for Medicaid. Medicaid includes payments for long-term healthcare, nursing home care, skilled care, hospice care, etc.

    Private Health Insurance Plan

    Even though a private insurance cover will call for hefty premiums, it can certainly cover comprehensive healthcare costs. Moreover, in case of planned retirements, early enrollment into a private insurance plan can significantly reduce the premiums. However, with increasing age, the premiums can become heavier on the pocket. Private insurance policies can be purchased by the individual or can be provided by the employer. These policies are issued based on health, age, and other risk factors of the applicant. In some cases, where a person has a serious medical condition, the insurance providers may also deny coverage. Private insurance companies also offer Medicare Supplemental Insurance, also known as Medigap, which provides for coverage such as dental expenses, etc., that are otherwise not covered in a Medicare plan.

    Spousal Coverage

    Another beneficial retirement medical funding source can be the spouse’s employer-sponsored healthcare plan. For retirees who have working spouses, enrollment in their healthcare covers will help cover for medical expenses. The spouse must notify the company about the addition within 30 days from the termination of their insurance plan. Any delay can postpone the enrollment till the end of the year.

    Health Insurance Exchanges

    This option is the most suitable for people who lose their employer-funded health covers due to various reasons. Healthcare insurance exchanges were created under the Affordable care Act of 2010. The exchanges are market places where a person can choose the most relatable health plan, each of which has different advantages and disadvantages. If your household income is below a certain level, the government also provides subsidies to minimize premiums. A retiree can obtain the coverage via a designated enrollee or through the government’s website within 60 days before or after retirement.


    The least favorable healthcare plan for retirement is COBRA - Consolidated Omnibus Budget Reconciliation Act. COBRA allows a person to continue the employer’s health care plan up to 18 months even after retirement. COBRA directs the employer to offer identical coverage to the retired employee as received before retirement; though employers tend to not subsidize premiums. This leaves the premium burden on the employee, along with an additional 2% administrative cost. Despite being expensive and having multiple cons, COBRA can be used for a short-term benefit in cases where all other retirement healthcare options have been exhausted, or the retiree is seeking early retirement only about one and a half years (18 months) before the official age of 65 years.

    Part-time work

    Retirement typically implies no working, yet a part-time job can prove very beneficial if it provides health insurance. Today, many companies offer healthcare covers for part-time workers, though they may be subject to certain conditions such as minimum working hours in a month or year, eligible weekly hours, etc. Part-time work also brings in an additional income source to pay for retirement costs.

    To sum it up

    As per studies, a healthy couple retiring at 65 will need to shell more than $285,000 on healthcare costs after retirement. This does not include premiums, prescribed drug costs, etc. With such alarming figures of more than a quarter of a million people barely covering their post-retirement medical expenses, it is critical for a person to have a comprehensive and affordable healthcare cover.

    To seek the best healthcare options available to you, it is advisable to take help from professional Financial Advisor.

The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice.
A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.