Preparing for the cost of health care in retirement

For a couple who are 65 years old now, they can expect to pay around $606,337 on lifetime medical expenses. By the time they are both 87, the couple will spend 73 cents of every dollar they receive from Social Security on health care — even after claiming at Full Retirement Age (FRA) and including annual cost-of-living adjustments (COLAs).

Consider these tips while planning to help cover your health care costs in retirement.

If you plan to retire at age 65 or later
"Planning at this age is easier because your costs are more fixed, thanks to Medicare eligibility," says Ash Toumayants, founder of Strong Tower Associates, based in State College, Pa. To get an idea of what Medicare coverage you would sign up for once you retire, and what that coverage would cost, visit medicare.gov.

Keep in mind that changes to Medicare are likely on the horizon. Still, looking at your Medicare plan options now, and estimating your monthly costs, is a smart move. Once you have that ballpark number, speak with your financial professional about retirement planning options that could help support that expense.

If you plan to retire before 65
If you're giving up the 9-to-5 grind before your 65th birthday, you'll need to get coverage until you become Medicare eligible. Some employers allow you to stay on your current insurance plan after you stop working, while others offer health insurance for their retirees. Talk to your HR department now about your future coverage options and what your financial contribution would be for each. If your employer doesn't offer additional insurance, you'll need to buy it on the health care exchange.

If you and your spouse jointly make under a certain amount per year, you could quality for a subsidy, lower out-of-pocket costs, or even Medicaid. Those numbers also vary by state, but you can determine your eligibility on healthcare.gov/lower-costs/qualifying-for-lower-costs.

Keep in mind, there is a loophole in qualifying for assistance. "Assets aren't factored into the equation," says Toumayants. "They only consider income."

So if you could live off of the money in your savings, and keep your income on your tax return under that threshold, you could be eligible for subsidies and lower out-of-pocket health care costs. That might mean directing your savings efforts now into a non-retirement account to pay for your living expenses in the pre-Medicare years. You should weigh the pros and cons of this approach with your financial professional to determine whether this would be the best move for you.

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