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3 Tips for Managing Medical Expenses in Retirement

retirement planning for medical expenses in retirement
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Did you know? A retired couple's total estimated healthcare costs could exceed the median price of a home.

2. Plan to cover the gaps in Medicare

Despite some common misconceptions, Medicare will not cover all your healthcare expenses in retirement. The list of healthcare costs Medicare won't pay for include:

  • Insurance deductibles
  • Vision and dental care
  • Hearing aids
  • Long-term nursing care
  • Assisted living
  • And more
Medicare Supplemental Insurance (Medigap), obtained through a private insurer, can help pay your deductible and some other expenses Medicare doesn't cover. But whatever you choose, you'll have to have to have the extra cash to pay for it. If you're still working and have a high-deductible health insurance plan, one way to save for retirement healthcare expenses is opening a health savings account (HSA), especially if you have an employer that will match your contributions. Because the money you save in an HSA rolls over every year, you can use it to help cover future out-of-pocket healthcare expenses. In addition, HSAs also offer significant tax advantages.

“Money goes into the health savings account on a pre-tax basis, it grows tax-deferred, and if it's used for qualified medical expenses, it goes out tax-free," says Synovus financial planner Blake Robinson, CFP®.

The IRS sets current annual HSA contribution limits. For 2021, those limits are $3,550 for individuals and $7,200 for families,4 although savers age 55 and older are allowed an additional $1,000 in catch-up contribution each year. You can't contribute to an HSA once you're enrolled in Medicare, so it's important to act now if you want to want to use an HSA as a savings tool.


3. Prepare for long-term care

Since Medicare doesn't pay for long-term care, consider whether buying long-term care insurance would be a good option for you. The structure of long-term care coverage has changed over the years, Robinson says. In years past, any money paid into premiums was simply forfeited if the long-term policies were never used. Today, some companies offer life insurance policies with long-term care riders. The death benefit decreases if you use the rider, but your beneficiaries still have a chance to receive something from your investment in the policy. A similar long-term care rider is available with certain annuities.

Payment terms vary for these arrangements, Robinson says, but people often fund them by shifting money from other types of investments, including retirement accounts.

Similar to how you rely on a team of trusted medical experts to maintain your health, a trusted financial expert can guide you in creating a holistic retirement savings plan that provides enough funding for your healthcare.

Synovus is here to help. When you're ready to talk with a financial consultant, please call us at 1-888-SYNOVUS (1-888-796-6887) to get started.

Important disclosure information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. Fidelity Viewpoints, “How to plan for rising health care costs," accessed December 31, 2020. Back
  2. Zillow, “United States Home Values," accessed December 31, 2020. Back
  3. Genworth, "Compare Long Term Care Costs Across the United States," accessed December 31, 2020. Back
  4. Ashlea Ebeling, "IRS Announces 2021 Health Savings Account Contribution Limits, Still Time To Make 2019 And 2020 HSA Contributions," Forbes, published May 20, 2020, accessed December 31, 2020. Back