Healthcare and Retirement


The rising cost of health care in America has become one of the primary risks to a financially secure retirement.

Health insurance premiums and medical expenses now consume a hefty portion of retiree savings. And the future looks more troubling. Healthcare costs are expected to continue to increase faster than inflation, and many employers are re-evaluating their ability to offer retiree health insurance coverage.

Strategies for Managing Healthcare Expenses in Retirement

So how can you make sure rising healthcare costs don’t wreck your carefully laid retirement income plans?

  • Leverage COBRA coverage.

COBRA, the Consolidated Omnibus Reconciliation Act, is a federal law that requires most employers to offer former employees group health insurance for up to 18 months after termination of employment. Although group health coverage may be continued at group rates, continuing coverage under COBRA may be expensive. COBRA premiums can be up to 102% of the cost of coverage under the group health plan.

If you do elect to continue group health coverage under COBRA, it is important that you retain other coverage as soon as possible after COBRA coverage ends so that you will avoid a gap in coverage that could affect your future rights under federal law to obtain health insurance coverage.

  • Retire at age 65 and leverage Medicare.

Medicare is the primary health insurance provider for most Americans 65 and older. It’s best to visit your local Social Security office three months before your 65th birthday to enroll for Medicare. Medicare Part A helps cover inpatient care in hospitals. Most people do not have to pay premiums for Medicare Part A.

When enrolling in Part A, you should consider enrolling in Part B, as this will give you additional coverage for doctors’ visits. Keep in mind that you will have to pay the monthly premiums and co-payments that apply. If you wait to enroll in Medicare Part B until after you are initially eligible, you may have to pay a higher premium.

Prescription drug coverage is available under Medicare Part D. However, you must pay a monthly premium (which varies by plan) and a yearly deductible for this coverage. You must also pay a part of the cost of your prescriptions, including a co-payment or coinsurance. Costs will vary depending on which drug plan you choose.

Since Medicare will not pay for all of your medical costs, you may wish to buy supplemental coverage. Consider purchasing a Medigap policy, which pays for many expenses not covered by Parts A and B, such as skilled nursing coinsurance and certain types of preventive care.

There are 10 different Medigap policies, named “A” through “J,” and they are standardized across the insurance industry. This means the same policy can be compared across insurance providers based on cost. Be sure to sign up for Medigap insurance within six months of enrolling in Medicare Part B, to ensure that your application is accepted.

Despite the recent approval of the Medicare prescription drug benefit, experts estimate that a couple retiring today at age 65 without employer-provided health insurance can expect to spend $216,000 to pay their medical expenses to age 80. If they both lived to age 90, those estimates would jump to $444,000. And the estimate is even higher if potential long-term care costs are included.

To learn more about Medicare, visit the official site on the web at or phone 1‑800-MEDICARE, 24 hours a day, 7 days a week.

Your Financial Adviser

Understanding how healthcare costs affect your retirement is essential to putting together a retirement income plan that truly meets your needs. Few people approaching this exciting time in their lives have all the answers. That’s why sitting down with a financial advisor can help you make more informed and realistic decisions about what lies ahead.

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Lee Eisinberg is a Managing Partner with ABLE Financial Group in Scottsdale, Arizona. For more information, please call Eisinberg at (480) 258-6098. Investment products and services are offered through Wachovia Securities Financial Network, LLC (WSFN), member FINRA and SIPC, a registered broker-dealer and separate non-bank affiliate of Wachovia Corporation ABLE Financial Group is a separate entity from WSFN. © 2008 Wachovia Securities Financial Network, LLC.

Money Talks is a regular department in Agency Sales magazine. This column features articles from a variety of financial professionals and is intended to showcase their individual opinions only. The contents of this column should not be construed as investment advice; the opinions expressed herein are not the opinions of MANA, its management, or its directors.