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Retiring this year? How much you'll need for health-care costs

Key Points
  • A healthy 65-year-old couple retiring in 2019 will need close to $390,000 to cover health-care expenses, including Medicare Parts B and D, according to HealthView Services.
  • Dental care is one of the biggest blind spots for retirees, as original Medicare doesn't cover this expense.
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Healthy couples retiring in 2019 will have to dig deep to cover medical expenses.

A 65-year-old couple in good health will need $387,644 to pay for health-care costs for the remainder of their lives, according to HealthView Services, a provider of health-care cost projection software.

That sum includes premiums for Medicare Part B (medical insurance) and D (prescription drug coverage), dental insurance and out-of-pocket costs related to doctor's exams, hearing services and more.

The estimate excludes long-term care expenses.

Here's the kicker: The healthier you are, the more money you'll spend over your lifetime, due to your increased life expectancy.

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A 55-year-old woman in good health will spend an average of $13,165 in annual medical costs at age 65, HealthView Services found.

Meanwhile, a woman who's the same age but is also a Type 2 diabetic can expect to spend an average of $16,635 in yearly health-care costs.

Over time the healthy retiree will pay $424,875 for medical costs, while the diabetic, with the lower life expectancy, will pony up $266,163, the software provider found.

"Annually, the healthy person will spend less out of pocket, but over the course of their lifetime, they will spend more because they have additional years of expenses," said Michael Daley, product marketing manager at HealthView Services.

Surprise outlays

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A major misconception among retirees is that merely having Medicare coverage will keep them from shouldering large health-care costs.

"There are significant expenses that people can incur for services that aren't covered by the program," said Tricia Neuman, director of the Kaiser Family Foundation's program on Medicare policy.

Those expenses include the cost of assisted living. The annual national median cost of staying at an assisted living facility hit $48,000 in 2018, according to Genworth Financial.

Dental care is another blind spot for retirees, as original Medicare doesn't cover this expense.

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Nearly 2 out of 3 Medicare beneficiaries — close to 37 million people — don't have dental coverage, according to the Kaiser Family Foundation.

Those who do have coverage get it through private Medicare Advantage plans, Medicaid and private plans, according to Kaiser.

About 20% of Medicare beneficiaries who received dental services spent more than $1,000 in 2016, Kaiser found.

"Some dental services are inexpensive, like cleanings and annual checkups," said Neuman. "But some are expensive, like crowns and implants."

Nipping out-of-pocket costs

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While Medicare won't cover all your costs in retirement, there are steps you can take to mitigate expenses.

Still working and under 65? Fund your HSA: If you aren't on Medicare and you're in a high-deductible health insurance plan, fund your health savings account.

These accounts carry three tax benefits: Your contributions are pretax or tax deductible, and your savings will grow free of taxes. Finally, distributions are tax-free if used for qualified medical expenses.

You can no longer fund an HSA once you've enrolled in Medicare, but you may withdraw from it to cover those health-care costs.

Understand your plan: Get a thorough understanding of your coverage, be it a retiree health plan or a private Medicare Advantage plan. Know your deductibles, co-payments and co-insurance.

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Know who's in network: Got a Medicare Advantage plan? How about dental coverage? Make sure that your doctor or dentist is in network.

Review coverage annually: Medicare open enrollment for 2020 runs from Oct. 15 to Dec. 7. During this time, you can change from original Medicare to a private Medicare Advantage plan or switch back to original Medicare.

Assess whether your plan still makes sense for your needs.

"Plans change in significant ways that can affect how much you pay in premiums and cost sharing, as well as whether drugs are covered," said Neuman.

"All of these plan characteristics can have a big impact on household budgets," she said.