If you’re looking to retire but wondering just how important health insurance in retirement really is, it’s a pretty big deal! Learn more about why in this article:

In 1960, health care costs were $146 per person. In 2016, that number has gone up to $10,348 per person.

Health care costs are increasing and this impacts everything from hospital closures to deductible costs. So if you’re thinking of retiring, you should prepare yourself to cover the costs of your healthcare.

Retirement health insurance is one way to ensure you’re protecting your financial stability when you’re no longer employed. But exactly why is it so important? Keep reading to find out.

Why Is Retirement Health Insurance Important?

Properly planning retirement means planning for health care. Below we’ve listed the top reasons that you should be considering how you’ll pay your medical expenses before you decide to retire.

Rising Cost of Healthcare

In 2016, the cost for healthcare was over $3 trillion. That number is only expected to increase. When you’re living on the fixed income of retirement, you need to account for costs to increase.

For example, in just 2 years, the cost of medical expenses has risen over $40,000. In 2014, out of pocket health care expenses for a retired couple were $220,000. In 2016, that amount has increased to $260,000.

With long-term care included in that cost, another $130,000 can be added to that already large figure. Add to that the fact that people are living longer and prescription cost are also increasing and you’ve got many variable costs to plan around.

Problems with Early Retirement

One of the key factors determining whether someone can retire early or not is health care. Depending on when you leave the workforce, you may not be eligible for Medicare. That leaves you with no coverage until you qualify.

People who retire early are eligible for Social Security benefits when they turn 62. But it’s not until age 65 that you can get any help from Medicare.

This gap can lead to out of pocket expenses. That’s because you’re responsible for finding your own insurance when you fall outside of the qualifying ages.

While some people will receive a continuation from an employer-sponsored plan and others already have Medicare supplemental insurance plans, those with no coverage may end up paying significant medical costs without any form of health insurance.

Problems with Long-Term Prescriptions

Beyond the rising costs of prescriptions, there’s also a gap in the Medicare program that affects people with long-term prescriptions. This is known as the “donut hole” in prescription drug coverage.

The donut hole affects people who spend more than $3,700 out of their own pocket for prescriptions. They are then required to pay up to 51% of prescription costs that go over that amount. If you require constant medication, this could end up costing a significant amount.

Problems with Long-Term Care

Even if you don’t currently require long-term care, you may in the future. If the unfortunate situation arises, it’s important that you’re able to manage chronic illness or disability. Without help, you may become dependent on your children or extended family members.

Preparing for Medical Expenses

Investing in health insurance coverage can help you plan for medical emergencies. They also help you save your money and budget according to what you’ll need during retirement.

By purchasing health insurance in advance, you can budget and fit it into your current and future financial goals. When a medical expense arises, you’ll have coverage for hospitalization and care. This leaves your other retirement savings available for what you have planned.

Tax Savings

Having a health insurance plan can actually save you money in taxes. You’ll have the money you need to cover medical expenses but can also save taxes in the present.

Other Alternatives

Depending on your situation, you may have options available to you when it comes to purchasing retirement health insurance. You don’t necessarily have to purchase a private individual plan.

If your spouse has not yet retired and has health insurance, you may be covered under their employer plan. You might even qualify for extended health insurance coverage under your own plan. Companies sometimes offer this as a fringe benefit for people who retire early.

For people without this option, individual health insurance plans may be the only option. However, they can be very expensive and unaffordable for some people. That’s even truer when premiums are based on age and health.

Making matters worse is that some health insurers won’t cover early retirees based on pre-existing conditions as well as their age and general health status. Often considered “bad risks”, there are alternative options for these individuals.

Health Saving Accounts

A Health Savings Account (HSA) offers flexibility, portability, as well as advantages in terms of taxes.

HSA’s are offered to people who are still working. They must be enrolled in a high-deductible health insurance plan to qualify.

These accounts can help to save for retirement health costs. They can even be used before retirement if necessary. They’re also tax-free and can be spent tax-free on certain eligible expenses.

One of the other benefits of an HSA is that it will move with you as you move jobs. That is, it’s dependent on your employer.


Workers who are currently insured may also opt for help from the Consolidated Omnibus Budget Reconciliation Act, 1985. This continuation coverage can assist with medical expenses for 18 months following retirement. If you work in a place with more than 20 employees, you’re entitled to 102% of the group rate for that 18-month period of time.

Improve Your Health

One of the best ways to minimize your health insurance costs is to take care of your health now. Consider both your financial and physical health in retirement planning.

Managing Health Care Costs

As prescriptions costs and costs for medical care increase, retirement health insurance is becoming more important. Especially for those who plan to retire early as well as those with long-term costs to consider, ensuring you’re not paying out-of-pocket for your expenses is essential to enjoying your retirement.

But planning for retirement can start by taking care of your health today. For more on all things healthy living and nutrition, visit our blog.

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If you're looking to retire but wondering just how important health insurance in retirement really is, it's a pretty big deal! Learn more about why in this article: In 1960, health care costs were $146 per person. In 2016, that number has gone up to $10,348 per person. Health care costs...