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Health Care costs are significant in Retirement


While the cost of Health Care is significant in retirement, it is also an unknown.

Out-of-Pocket Medical Costs in retirement*---factoring in Medigap circa. 2012
Percentile Male, aged 65 Female, aged 65 Married couple, aged 65
50% $71,000 $95,000 $166,000
90% $136,000 $156,000 $290,000


*This  does not include the cost of Long Term Care.

The availability of Health Care benefits heavily influences the timing of the decision to retire.  

  • COBRA coverage is for 18 months.
  • Not eligible for Medicare until 65.
  • Retiree health benefits encourage employees to retire early.
  • Conversely, many delay retirement to continue with health insurance coverage.
  • Choose appropriate Medigap insurance.

Active Duty Military retirees are eligible for TRICARE. Reservists can purchase TRICARE Retired Reserve during the "grey period" until eligible for TRICARE For Life at 60.  TRICARE For Life coordinates with Medicare once eligible at 65.  Some services, such as chiropractic and dental services, are not covered by Medicare or TRICARE For Life.


NOTE:  Consider establishing a Health Insurance "sinking fund" to accommodate out-of-pocket health care costs during retirement.  Set these funds aside from your other assets to avoid dipping into them for discretionary spending.  Any assets in Health Care Savings Accounts (HSAs) are ideal for this purpose.  Funds were contributed with pre-tax dollars and can be withdrawn tax-free when spent on qualified medical expenses


Much of your the health care costs over a lifetime are incurred in the final months.  Effective planning via Advanced Directives, Health Care Powers of Attorney and Do Not Resuscitate Orders, ensure life is not prolonged excessively.  


<NEXT:  Long Term Care Insurance>


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