Why Does Healthcare Become A Major Expense After Retirement?

Updated on May 20, 2022

Healthcare is one of the most expensive things in life, and it’s essential to take this cost into account when planning your retirement budget. An RBC Wealth Management report’s anticipated lifetime care expense for a 65-year-old retiree is more than $400,000. Factor in long-term care costs, which can add up to $100,000 in a year. With such a significant amount of money involved, it’s wise for retirees to consider their retirement allocations and healthcare costs beforehand. 

Why Healthcare Is A Major Expense for Retirees? 

There are a few key factors that contribute to these high costs.

Increasing life expectancy

One of the biggest reasons healthcare costs are so high in retirement is that people live longer. According to the World Health Organization, the global average life expectancy has increased by more than five years since 2000 and is now over 70 years old. This life expectancy means that retirees can expect to spend more years in retirement and will need to plan for increased healthcare costs as they age.


Another factor that contributes to rising healthcare costs is inflation. Medical inflation has been outpacing general inflation for many years now and this trend is expected to continue. So, the health care services that cost $100 today may cost $200 or more in 10 years. This is why it’s essential to factor in the potential for inflation when budgeting for healthcare costs in retirement.

The Affordable Care Act

The Affordable Care Act (ACA) has also impacted healthcare costs. The ACA has helped make health insurance more accessible and affordable for many Americans. However, it has also resulted in higher premiums and deductibles for some people. This is also something to keep in mind when thinking about your retirement budget.

As you can see, several factors contribute to rising healthcare. It’s essential to be aware of them and plan your future healthcare expenses with them in mind. Not doing that can leave you without the much-needed resources to cover your healthcare costs in the future.

How To Prepare For the Retirement? 

Employees who leave the workforce before they turn 65 will lose their employer-sponsored health insurance. This is why you need to already have a plan for your healthcare needs before retiring. 

So, if you retire early one of the options for you is to purchase private health insurance. You can do so on any Health Insurance Marketplace or buy a plan directly from an insurer. 

If you are going to retire around the age of 65, look into Medicare and study everything about this program. There are many ways to go about Medicare. You can leave the Original Medicare that you will most possibly be enrolled in automatically (where part A is funded by the government and part B costs around $170) or purchase one of the available Medicare Advantage plans (where private companies offer coverage and the prices may vary greatly). You need to factor in the costs, preferred healthcare providers and their locations, as well as available plan benefits (like dental or vision) when choosing the right Medicare option.

You can also investigate Medicare Supplemental Plans if you only consider parts A and B of Medicare. This will help with covering copayments, deductibles, and coinsurance. Individuals with this supplemental plan will also have access to a network of healthcare providers.

If you’re looking for coverage in retirement, be sure to compare your options and find a plan that meets your needs and budget.

Don’t Let Healthcare Expenses Ruin Your Retirement Plans 

Choosing the right Medicare plan is crucial in planning for your retirement. A trustworthy Medicare advisor can help you navigate the complex world of Medicare and find the best coverage for your needs. Consulting with one will help you ensure that you have the best coverage for protecting your health as well as your finances. Apart from that, advisors can also help you understand how rising healthcare costs can impact your retirement plans and recommend how to offset those costs.

Bottom Line 

Rising healthcare costs are a reality for many Americans, but you can be prepared for them with proper planning. Don’t wait until you’re already retired and dealing with healthcare expenses gets too complicated. Consult with a financial advisor or use handy online tools like Hella Health’s Personal Shopper to compare various plans and receive a recommendation of a plan that is most likely to suit you. Such Online Advisors consider your lifestyle, your current benefits, as well as your future health needs so that you have the most optimal coverage to protect both your health and finances.

The Editorial Team at Healthcare Business Today is made up of skilled healthcare writers and experts, led by our managing editor, Daniel Casciato, who has over 25 years of experience in healthcare writing. Since 1998, we have produced compelling and informative content for numerous publications, establishing ourselves as a trusted resource for health and wellness information. We offer readers access to fresh health, medicine, science, and technology developments and the latest in patient news, emphasizing how these developments affect our lives.