Planning for health care expenses in retirement is an important consideration of an overall retirement plan. Many people are surprised to realize that being enrolled in Medicare does not mean “free health care.” In fact, for most of our clients previously covered by employer-provided health insurance, the health care costs they incur when on Medicare are greater than what they paid previously. Depending on your income, the cost of Medicare Parts A, B, and D ranges between $160 and $582 per month, per person. Therefore, a couple in retirement could spend between $320 and $1,164 each month on Medicare premiums. In addition, there are co-pays and deductibles to consider, along with the cost of supplemental coverage if obtained. For example, the cost for a 65 year old female Medicare Plan F is, on average, is $207 per month¹.

These costs demonstrate the need for thoughtful planning prior to enrolling in Medicare, particularly as it relates to taxable income throughout your retirement years. Even if you are not earning income through employment, distributions from pre-tax retirement accounts like 401(k)s and IRAs can add to your taxable income for purposes of Medicare premiums. Diversifying the tax treatment of distributions of your retirement savings is an important aspect of a thoughtful, well-designed retirement income strategy. Taking advantage of Roth 401(k) and Roth IRA accounts, accessing cash value from life insurance policies², or distributing funds from after-tax accounts can help to minimize taxable income throughout retirement, keeping Medicare premiums low.

This article provides additional details on Medicare—how it works, what it covers and doesn’t cover, what it costs, and when to enroll. Please reach out to our team to discuss your retirement plan further.

¹HTTPS://WWW.MEDICAREFAQ.COM/FAQS/AVERAGE-COST-OF-MEDICARE-SUPPLEMENT-PLANS/ 

²THE PRIMARY PURPOSE OF PERMANENT LIFE INSURANCE IS TO PROVIDE A DEATH BENEFIT. USING PERMANENT LIFE INSURANCE ACCUMULATED VALUE TO SUPPLEMENT RETIREMENT INCOME WILL REDUCE THE DEATH BENEFIT AND MAY AFFECT OTHER ASPECTS OF THE POLICY.