It's not exactly a secret that healthcare tends to be a huge expense for retirees. But as of 2023, Fidelity estimated that the average 65-year-old could expect to spend $157,500 on healthcare in retirement, even with Medicare coverage.
Meanwhile, according to the Federal Reserve, the typical 65-year-old only has $200,000 in retirement savings. So, it's easy to see why healthcare in retirement has the potential to be such a huge burden.
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The good news, though, is that there are steps you can take to save money on healthcare as a Medicare enrollee. Here are a few to employ.
1. Enroll on time
New Medicare enrollees get an initial seven-month period to sign up. That period begins three months before the month you turn 65 and ends three months after that month.
If you don't sign up during your initial enrollment window, you can enroll in Medicare later on. But from there, you risk being penalized for signing up late. Specifically, the cost of Medicare Part B rises 10% for each year-long period you're eligible for coverage but don't sign up.
Now, in some cases, you can delay your initial enrollment without penalty and sign up for Medicare during a special enrollment period instead. But you'll need to make sure you qualify for one of these periods. Generally, you will qualify if you're on a group health plan with 20 or more employees, but it's best to do your research and make sure your specific coverage or situation qualifies.
2. Use Medicare's free preventive services
As a Medicare enrollee, you'll be charged for a host of expenses. Each time you use Part B, for example, there will generally be coinsurance to cover on top of your annual Part B deductible.
But Medicare enrollees are also entitled to a number of free services each year. These include wellness visits, vaccines, and certain screening exams. It pays to see what no-cost benefits you're eligible for since staying on top of health issues could lead to fewer future problems and expenses.
3. Get Medigap coverage
Your out-of-pocket costs have the potential to be substantial as a Medicare enrollee. This year, for example, you're looking at a deductible of $1,632 each time you're admitted to the hospital as an inpatient.
That's why buying supplemental insurance, also known as Medigap, is a good idea. A Medigap plan could pick up the tab for some of the costs you'd otherwise face based on your Medicare coverage.
Your initial window to enroll in Medigap lasts six months and begins the first month you have Medicare Part B coverage and are 65 or older. It pays to sign up during this time since you can't be denied a Medigap plan due to pre-existing conditions. If you wait too long, you risk losing out on Medigap coverage or paying more for it.
Healthcare has the potential to put a strain on your budget in retirement -- but it doesn't have to. Make these essential Medicare moves to avoid the financial stress you don't deserve.
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