Healthcare considerations

Even if you're currently in tip-top physical shape, it helps to get some key healthcare items in order before retiring.

If you plan to retire before becoming qualified for Medicare at age 65, you may want to make sure you are covered by health insurance in between employment and Medicare eligibility. And because Medicare does not cover everything, there are steps you can take now to help prepare for healthcare costs in the future. Health Savings Accounts and Long-term care insurance are additional options to consider as you plan for the years ahead.

Healthcare Check-up

Most retirees receive their healthcare through Medicare, the government health insurance program that's available to Americans who qualify beginning at age 65. While Medicare is a low-cost insurance option, it is not free and it only covers about 60% of total healthcare expenses for retirees. So you may want to take some time before you retire to familiarize yourself with how Medicare works. And here are some other ways to help prepare for future healthcare expenses:

Estimate healthcare costs: Consider creating a budget for your actual and projected healthcare costs for the years ahead. You can begin by breaking down annual costs for prescriptions, insurance premiums and deductibles, out-of-pocket expenses, any services not included in traditional Medicare (such as dental, vision and hearing) and any other healthcare costs that come to mind. Research how much of these costs will be covered by Medicare. Depending on your health and family history, you may also want to factor in projected cost of long-term care needs, which can be significant and are not covered by Medicare.

The following table shows that as a 65-year-old couple ages, monthly premiums and out-of-pocket costs will increase dramatically over the course of retirement. A fairly manageable $1,004 monthly expense will almost double by age 75 and grow to $3,153 per month — a 214% increase — by age 85.1

Cost Projections for 65 year old couple

Consider getting extra coverage: If your out-of-pocket costs will still be significant, consider opting for a Medicare Advantage plan, prescription drug plan or Medigap plan offered by private insurers to cover costs not taken care of by Medicare.

Consider contributing to a health savings account: If you have access to one while you are still working, think about opening a Health Savings Account (HSA). These accounts are offered alongside high-deductible health plans and can be used to pay for qualified medical expenses while you are working or in retirement. HSAs offer triple tax-free advantages — contributions you make through payroll deduction, earnings and distributions for qualified medical expenses are not subject to federal and most state income taxes. Once an account meets a certain balance threshold, you can transfer your HSA balances in mutual funds to maximize HSA earning potential. Unused dollars in an HSA can be rolled over from one year to the next, so you can use this this money for qualified medical expenses during retirement.2

Decide when you want to retire: When you choose to retire is an important consideration that will impact your healthcare costs. If you envision retiring before age 65, you will not yet be eligible for Medicare and will need to make accommodations for coverage. Perhaps your employer extends healthcare coverage to retirees, or you may wish to switch to a working spouse’s medical plan or find your own coverage in the healthcare marketplace. You can also use tax-free savings from your HSA to pay for medical premiums. If you plan to retire at age 65, be sure you are aware of the eligibility and process requirement for obtaining Medicare.3

Lead a healthy lifestyle: Keep physically and mentally active in the years ahead through both low-impact activities you enjoy, like golf or gardening, to mentally stimulating hobbies, like bridge and other social activities. Doing so will keep your body and mind sound and allow you to enjoy your time in retirement.

No matter your age, make sure you have the most up-to-date information about your coverage, deductibles and benefits, and shop around for the most affordable coverage.

$363,000 is the estimated amount that a married couple with high prescription drug expenses will need to save in order to be able to afford healthcare premiums and out-of pocket drug expenses during retirement.4

Learn more about long-term care insurance

Long-term care insurance is different. It is designed to provide coverage if you become chronically ill. Depending on the policies, provisions and the available options you select, a long-term care insurance policy can cover potential costly services such as at-home healthcare, assisted living and even custodial care, including help with eating, bathing and dressing. It also includes medical care for degenerative conditions and cognitive disorders, such as Parkinson’s disease and Alzheimer’s, respectively. These are costs that are not covered by traditional Medicare (although Medicaid will cover some services to low-income individuals who qualify). You should read the provisions of the policy carefully prior to purchase to learn about any exclusions, limitations and waiting periods before coverage takes effect.

Buying a long-term care insurance policy before retirement may protect you against the increasing costs of these services in the years ahead. According to the American Association for Long-Term Care Insurance (AALTCI), the best time to start planning for long-term care needs is between the ages of 52 and 64, when you are still in relatively good health and less likely to be turned down for coverage. But shop carefully. It’s important to get to know these policies, and compare benefits and providers before deciding whether it's right for you. Average annual premiums for a couple aged 60 from several providers range from approximately $2,465 to $3,050, according to the AALTCI. Premiums will be lower for younger and healthier individuals.5

Next steps

How TIAA can help

Give us a call

We're here to help.

Weekdays, 8 a.m. – 10 p.m. (ET)


Open an HSA

If your employer lets you choose your HSA administrator or you want to rollover an HSA from a prior employer.

Learn more

Explore resources that provide more in depth content on key retirement topics.

HEALTHVIEW SERVICES: 2018 Retirement Healthcare Costs Data Report©

TIAA HSA Resource CenterOpens in a new window

Social Security Retirement Benefits brochure. January 2021, PDF

Savings Medicare Beneficiaries Need for Health Expenses in 2019: Some Couples Could Need as Much as $363,000. Employee Benefit Research Institute Notes. May 2019. in a new window

2019 National Long-Term Care Insurance Price Index, in a new window

Certain products and services may not be available to all entities or persons.

Please note that TIAA is not responsible for the content or privacy policies of third-party sites that may be referenced in this article or to which you may link from this article. TIAA does not endorse or recommend the products, services, or information found on any third party site.

This material is for informational or educational purposes only and does not constitute fiduciary investment advice under ERISA, a securities recommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on the investor's own objectives and circumstances.