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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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Health care expenses after retirement

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: I had always assumed that once Medicare took over, my health care expenses would drop and stay low, but you seem to indicate otherwise and suggest budgeting $15000 to $20000 per year for health related expenses in retirement. Can you give more details?

A: A recent study by John Hancock Insurance indicates that, as a nation, we are less aware of health care expenses after retirement than we were a decade ago. For a large number of us, health care will be our largest expense in our final years and yet we are not even aware of this fact. It is obviously important to know what types of expenses are not covered by Medicare, the cost of those services and the probability of incurring these specific types of health care expenses. This data is published by AARP and many other sources. A short search on the Internet will probably be a sobering experience. For example, many people do not realize that the out-of-pocket costs under the Medicare prescription drug card are set at $7,200 for a married couple and these costs increase annually. A large number of seniors will hit this level in their final years. That does not even include the cost of the Medicare part D premium itself! The planning figure I suggested of about $15,000 per year for a couple including the cost of Medicare contributions and Medicare supplement insurance (roughly $1500 per person per year), long term care insurance (roughly $3,500 per person per year) and the cost of out-of-pocket expenses (assuming a modest $200 per person per month). This adds up to about $15,000 per year. With inflation, that figure could easily grow to over $20,000. Of course, not all of us will incur these expenses after retirement and many do not budget for those catastrophic health care expenses. But among the majority of us who do incur large medical claims not covered by Medicare, a significant number who do not plan appropriately will be bankrupt within a matter of months. That is the harsh alternative.


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