Everything You Need to Know About Retirement Healthcare

As you head into retirement, you might expect that your cost of living will go down, and for a lot of expenses, there is a very good chance it will. If you’re no longer working, you’ll probably spend less on things like transportation, business clothing and work lunches. One expense that likely will not decline in retirement, though, is healthcare.

Actually, your healthcare costs may even increase significantly in retirement, now that you’re no longer eligible for an employer-sponsored healthcare plan.

In fact, for most Americans, healthcare will be one of the most significant expenses during retirement, second only to housing and transportation costs.

As such, healthcare is not an expense you can afford to overlook or adequately plan for: The average retiree will need about $295,000 for healthcare expenses during retirement, and that number seems to be increasing with each passing year.

That figure also doesn’t factor in the costs of long-term-care facilities, which many people require at some point.

With that said, knowing how you’ll pay for healthcare coverage in retirement should be a part of everyone’s comprehensive financial planning checklist. It’s crucial that you understand your healthcare options, and how they differ from the health insurance plans and coverage you may have enjoyed during your employed years.

What’s your plan for healthcare in retirement? Contact the insurance specialists at PAX Financial Group and start the conversation.


Let’s start with Medicare, since it is one of the most popular terms used with “retirement healthcare.”

Medicare is the federally administered primary health insurance provider for retirees, and Americans are automatically enrolled in basic Medicare (Part A) once they reach eligibility.

Here are a few very important notes about Medicare:

  • You have to be at least 65 years old to qualify for Medicare. (If you’re old enough to retire but not old enough to qualify for Medicare, and if you don’t have retiree health benefits through a former employer, you’ll have to buy insurance coverage on the Health Insurance Marketplace.)
  • The basic Medicare plan (Part A) covers hospitalizations (and not much else).
  • You have the option to enroll in Medicare Parts B, C and D, each at an additional cost. Part B covers doctor visits and outpatient care, as well as certain preventive costs. Part C, also known as Medicare Advantage, is an alternative to Parts A and B. Part D offers coverage for prescription drugs.
  • Basic Medicare (Part A) will not pay for dental care; vision screenings and eyeglasses; hearing screenings and hearing aids; or long-term-care expenses.
  • While most people won’t pay a monthly premium for basic Medicare (Part A), Medicare is not entirely free healthcare. You’ll still have to pay a premium for additional coverage (Parts B, C and D), as well as co-pays or co-insurance and other expenses.
  • If married, you and your spouse each have individual coverage through Medicare, which means that if something happens to one spouse, the other’s coverage is not affected. However, it also means that if one spouse is eligible for Medicare, the other isn’t also necessarily eligible (for example, if one is 65 and the other is 62).

For more on how Medicare works, read our recent blog post: Medicare FAQs: PAX Financial Group Answers the Most Common Questions. The PAX Financial team has also put together this quick, four-minute video: Medicare Most Common Questions.


Because there’s a lot that Medicare itself doesn’t cover, many retirees opt for a separate additional policy, called Medigap insurance, to fill in the holes. Medigap can help with co-pays and deductibles. There are 10 standard Medicap policies, each offering different levels of coverage, to choose from. The plan details are set by the government.

Medigap won’t help you if you have a Medicare Advantage Plan, though, because it won’t pay out if you’re covered by Medicare Part C (the Advantage Plan). If you’re thinking about moving into a Medicare Advantage Plan, talk to your financial advisor about discontinuing the Medigap insurance, since one is taking the place of the other anyway.

Like Medicare, private Medigap coverage is on an individual basis, meaning that each spouse has his or her own policy.


If you’ve been contributing to a pre-tax Flexible Spending Account (FSA), it’s important to remember that you have to spend the money in your FSA before you retire, or you’ll lose it. You can still be reimbursed for eligible expenses after you retire, as long as the expenses were incurred before you retired.

Unfortunately, an employer can only offer an FSA for active employees, so as a retiree, you will no longer be eligible to contribute to or access an FSA.


At PAX Financial Group, we help a lot clients with their healthcare questions. In our experience, more and more working Americans are taking advantage of a Health Savings Account (HSA) if their employer offers one.

Making pre-tax contributions to an HSA is a tax-efficient way to save toward out-of-pocket healthcare expenses in retirement. Some employers even offer a contribution-matching program, increasing your savings’ growth potential.

During your working years, try to contribute the max to your HSA if you can. The logic behind this is that HSAs offer triple tax benefits:

  1. Contributions are made with pre-tax dollars
  2. Earnings are not taxed
  3. Withdrawals are tax-free as long as they’re used to pay for qualifying healthcare expenses

Another significant benefit is that, unlike traditional FSAs, in which unused funds are forfeited, unused HSA funds do not have to be spent before retirement, and they roll over from year to year.

You can use funds from your HSA to pay certain Medicare expenses, like premiums for Medicare Part B and D. (You can’t use HSA funds for Medigap premiums.)

The Bottom Line

Healthcare and insurance in retirement can be a lot more complicated than it was during your working years.

When you were working, your employer may have offered a handful of policy types and plan options for you to choose from, and your plan probably covered your whole family. As a retiree, there may be many more healthcare choices and considerations to make, not the least of which is that you and your spouse must make independent decisions on individual policies and coverage, and that you may need to figure out how to fill in the coverage gaps left by Medicare.

If you have questions or concerns about your healthcare coverage in retirement that aren’t addressed here or would like to have a one-on-one discussion about healthcare as it pertains to your specific situation, contact us. PAX Financial Group offers full service financial services, and our team is prepared to discuss your options and their effects on your overall plan.

This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.

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