September 24, 2020

Edited 10/19/20

Wake-Up Call with Katie Couric: Exploring Healthcare Costs in Retirement

Many people—especially women—have done everything right when it comes to planning for retirement, but still get slammed with sky-high healthcare costs. Take a look at real-life costs for a wake-up call about prepping for healthcare throughout your life.

It’s fun to daydream about the perfect retirement, especially when you’ve worked your whole life to squirrel away enough for that around-the-world trip or cozy lakehouse. But those grand plans can quickly sour when confronted with the very real costs of healthcare, especially for women.

As a vocal advocate for cancer awareness and a supporter of cancer research, Katie Couric is also passionate about using her platform to highlight the complexities of the healthcare system. Now, her newsletter, Wake-Up Call, has teamed up with Silvur to address the reality of healthcare costs. 

Right now, a healthy 65-year-old couple retiring in the U.S. will need $285,000 to pay for healthcare costs for the rest of their lives, according to Fidelity’s annual Retiree Health Care Cost Estimate. 

Women often shoulder the burden of that cost alone, since 70% of 75-year-old women are divorced, single, or widowed (compared to the 22% of men who find themselves alone at 75). In addition, women make up 70% of nursing home residents. 

Plus, women are often drawing from fewer resources than they may have planned for throughout their life. Maybe their retirement nest egg was depleted by high out-of-pocket costs for cancer care, or by unexpectedly losing their health coverage when their partner died.

That $285,000 figure can seem insurmountably steep for many people. But there are several variables that could make that cost higher or lower for you. 

3 Healthcare Cost Factors

#1 Location, Location, Location

Retirees’ plans differ when it comes to moving. A report conducted by the Center for Retirement Research shows about 47% of retirees move post-retirement. Women or people facing financial hardship typically bounce from place to place during retirement. Factors like finances, taxes, and living near support networks factor into these decisions (as does sunshine!). But don’t underestimate the cost of healthcare when it comes to considering your post-retirement move options.

Where you live, and the associated retirement healthcare plan you choose, plays a huge part in how much you need to save for healthcare. If you’re 65, live in New York, and are enrolled in Medicare in 2020, you would annually pay:

  • Medigap plan: $5,469 
  • Medicare Advantage: $2,857 

Note: This is excluding any IRMAA surcharges (which could add up to another $5,040/year).

However, if you were to move to Naples, Florida the annual costs would be:

  • Medigap plan: $4,160
  • Medicare Advantage: $2,749

But taking a turn for the worse, if you become ill, your annual costs for Medicare Advantage can increase. For example, a woman with Stage 4 metastatic pancreatic cancer’s costs can increase to over $11,971 in New York or $15,675 in Florida. These costs do not factor in additional costs like brand medications not covered by your plan or out-of-network doctors if you are on Medicare Advantage. This can add an additional $21,552 or more in costs.

Source: Trusty.care, Silvur

By entering your zip code into Silvur, you can figure out what Medicare costs look like in your area, or get estimates on anywhere you’d consider moving to post-retirement. 

But that’s just health insurance costs—long-term care costs can quickly add up in addition to your monthly medicare bills. And the costs vary dramatically by location. Let’s compare a semi-private room in a nursing home in Arkansas, which is the cheapest state for healthcare costs, versus Masshachusetts, the most expensive state. 

  • Arkansas averages $66,065 per year.  
  • Massachusetts averages $149,672 per year. 

As you can see, living in Massachusetts would be more than double the price of living in Arkansas.

If you’re not sure about what your budget can handle in the years to come, Silvur’s Retirement Score gives you an idea of your savings journey and tips on optimizing those retirement funds.

#2 Hope for Health, Plan for Illness

Here’s hoping you’re so healthy in retirement that your grandkids can’t keep up. But it’s important to plan for other possibilities. Immune systems worsen with age. 60% of cancer patients are 65 or older, and it can easily cost patients $20,000 or more per year out-of-pocket, especially with hidden costs like travel to treatment. 

And even if you’re able to receive medication that keeps you relatively healthy and active, those drug costs can be debilitating. Americans spend about $1,200 per person each year on prescription drugs, more than any other country worldwide. Those numbers skyrocket if you’re treating conditions like cancer. It’s not unusual for those drugs to cost $10,000 for a single month. And there’s no end in sight to the rapid rise in price—the Centers for Medicare and Medicaid Services expect Americans to be paying about $1,635 per person by 2027. 

Here’s what you can expect if you have a Medicare Advantage plan:

If you are healthy, the annual out-of-pocket costs for prescription drugs can be approximately:

  • New York: $204
  • Florida: $96

But, if you are have a chronic or acute condition these annual numbers can skyrocket quickly to approximately:

  • New York: $2,874*
  • Florida: $6,578*

*This cost is based on prescription medication for an individual with Stage 4 metastatic pancreatic cancer. 

Source: Trusty.care, Silvur

If you choose to take branded medications not covered by the plan, you could face additional costs of $6,552 or more a year.

Keep this in mind when budgeting for healthcare after retirement. In addition to your monthly insurance costs, it’s critical to set aside money for unplanned and ongoing illnesses. With Silvur, you can add a ‘Plan for the unexpected’ goal to set saving aside for future healthcare costs. We recommend at least 6 months of expenses. 

#3 The True Cost of Healthcare

Breaking down the staggering costs of healthcare post-retirement—and realizing how factoring in those costs to your budget might completely alter your plans—can be sobering. But the sooner you start understanding your options and taking back some control by wisely planning for the worst, the better off you’ll be. 

Silvur’s Retirement Score helps you see how your decision of where to live and what your expected retirement spending, including healthcare, can impact how long your savings will last in retirement. 

For instance, Susan is 58 and plans to retire when she is 62. She lives in New York but dreams about retiring in Florida to enjoy the warmer climate and tax benefits. Most of Susan’s savings, excluding her home, is in a 401(k) and a taxable investment account. Unlike New York, Susan will not be subject to Florida’s state level income taxes once she starts to withdraw from her retirement accounts. 

Susan’s healthcare costs may be higher in Florida than in New York. However, the tax-saving advantages in Florida can offset the added healthcare costs, making Susan’s Retirement Score higher in Florida than in New York. Also, it should come to no surprise that being healthy could result in increasing her score up to 5 years compared to if she were sick.

Source: Trusty.care, Silvur

Before Medicare: Your Health Insurance Options and Costs

There are many reasons you might need to figure out health insurance before you’re able to go on Medicare. Maybe you’ve decided you’ve saved enough for retirement and want to get a head start on that world trip. You could lose coverage after a partner’s death, or a spouse might retire when they are Medicare-eligible before you are. Whatever the reason, there are four main health insurance options to consider: 

  1. COBRA. If you currently have coverage through your employer, you’ll typically be eligible for COBRA that allows you to stay on your current employer-sponsored plan. But you’ll be responsible for paying 100% of the premium, and that averages at $6,896 a year just for single coverage. For short-term coverage after a divorce or spouse’s death, you might qualify for COBRA for 36 months under your former spouse’s plan.
  1. Spouse’s plan. If you’re married, your spouse is still working, and they qualify for an employer-sponsored health plan, getting added to their plan is probably your best and most affordable option. Since employers that offer group health insurance plans typically pay a large part of the premium, you’d only be on the hook for a percentage of the total cost. 
  1. Former employer. Some employers that offer group health insurance coverage also offer a plan for their retirees, but retiree health benefits have become less common in recent years. You’ll need to check with your employer to find out if this is an option. If it is, your employer may pay for part of the premium, or you may be required to pay it in full.
  1. Healthcare marketplace. Retiring is typically considered a qualifying event that would allow you to enroll in an individual health plan in your state’s health insurance marketplace, outside of the annual open enrollment period. The plans through the marketplace are provided by private insurers, and the costs vary based on the insurer and type of plan you choose.

Medicare: Your Health Insurance Options and Costs

The good news: you qualified for Medicare! The bad news: it’s not super simple. There are several different avenues to coverage under Medicare. Most generally start with Part A and Part B, but then consider creating a plan for prescription drug costs and out of pocket expenses: 

Medicare Part A 

Medicare Part A helps pay for inpatient hospital care, nursing facility care after a hospital stay, and it may also pay for some home health and hospice care services. 

Most people qualify for Medicare at age 65. If you’re single and paid Medicare taxes for at least 10 years, you can get coverage under Medicare Part A without paying a premium. However, if you’re married or widowed, you can also qualify if your spouse paid Medicare taxes for at least 10 years. Similar to Social Security benefits, if you are divorced and have been married for at least 10 years, you qualify for medicare based on your ex-spouse’s benefit

If you, your spouse, or former spouse didn’t pay Medicare taxes for at least 10 years, you may be able to buy Medicare Part A, but you’ll have to pay a premium. If you, your spouse, or former spouse paid Medicare taxes for 30-39 quarters, the premium is $252 per month in 2020, but if it was less than 30 quarters, your premium will be $458 a month in 2020.


Medicare Part B

Medicare Part B helps pay for services offered by medical providers, outpatient procedures, medical equipment, certain home healthcare services, and some preventative care.

Unlike Part A, everyone must pay for Medicare Part B. The amount is determined by your income. The standard Part B premium in 2020 is $144.60 per person per month if you’re single, divorced, widowed, or married filing separately, and your adjusted gross income (AGI) is $87,000 or less per year. You’ll also pay the standard premium if you’re married, file jointly, and your AGI is $174,000 or less. If your income is above these thresholds, your premium will be higher.

Medicare Part D

Medicare Parts A and B don’t cover all medical expenses, including prescriptions. Many people choose to purchase Medicare Part D to help pay for prescription costs that A and B don’t cover. You can purchase these plans regardless of your marital status. But if you’re married, and you and your spouse want coverage, you must buy separate policies. The costs vary based on the policy you buy.

Supplemental Coverage (Medigap or Medicare Advantage)

Even with parts A, B, and D, you are not fully covered. You will likely be required to pay deductibles, copayments, and coinsurance for services. Many people choose to purchase a supplemental insurance—known as Medigap—for out-of-pocket costs Medicare doesn’t cover. You and your spouse must purchase separate policies.

If you are considering Medigap, you should decide whether Medicare Advantage policies (Part C) are right for you. 

The main difference between Medicare Advantage policies and Medigap are the premiums. Medicare Advantage premium costs are typically much lower than the higher Medigap ones but out-of-pocket costs can escalate quickly if you want to access out-of-network doctors. It can be a cost-effective plan if you are still relatively healthy, but if you have or anticipate a condition where you might need frequent doctor’s visits or procedures, a Medigap supplemental policy might be your better bet. 

Financially planning for healthcare in retirement

There are a few additional steps you can take to optimize the cost of your healthcare:

  • Fund an HSA
    Setting aside tax-free money into a health savings account (HSA) can be a smart investment in your healthcare future. Although the plans that you need to qualify for an HSA typically come with high deductibles, the premiums are often lower. Plus, you can add to an HSA all the way up until you receive Medicare, even if you retire early, and the money is yours forever. 
  • Get a prescription drug card 
    Look to cards like Hippo that compare prescription medication costs at popular pharmacies like Costco and Walgreens so you pay the lowest price.
  • Have a plan for long-term care
    Not all health insurance plans will have coverage for long-term care needs such as assistance with daily independent living or nursing home care. You can look into separate long-term care insurance, or consider a home equity loan to help pay for these costs. This can be a viable option, particularly for women who no longer have a partner but don’t yet want to sell their home outright.
    • Average annual costs of long-term healthcare in 2019:
      • $52,624 for a Home Health Aide
      • $48,612 for Assisted Living Facility
      • $102,200 for a private room in a Nursing Home Facility

Not sure how your current resources stack up to prepare you for future healthcare costs? Check out Silvur’s free retirement planning. We’ll provide you with a retirement score and guidelines to help you know if you’ve strayed off track, or if your goals are within reach. Thinking about uncertain futures and planning for the worst isn’t as fun as daydreaming about the projects or trips you’ll finally have time for post-retirement. But preparing now can relieve you and your loved ones of stress and debt, and give you the tools to enjoy the retirement you always wanted.

Want Katie Couric to deliver the news you need to know every morning to your inbox? Sign up for her newsletter Wake-Up Call with Katie Couric here.