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Protecting Retirement Savings from Healthcare Costs

How to Safeguard Your Retirement Savings as U.S. Health Care Costs Continue to Rise

Posted on July 26, 2022 by Austin Lang

How to Safeguard Your Retirement Savings as U.S. Health Care Costs Continue to Rise

It seems like everything is getting more expensive lately: food, gas, housing, you name it. Still, few things have seen such drastic price increases as the cost of healthcare in the U.S. 

Medicare Part B premiums have risen by a shocking 14.5 percent in 2022, leading to some serious financial issues for people on fixed incomes. How can you safeguard your retirement savings in the face of unprecedented inflation?

Planning ahead can help you maximize your retirement savings, but even if you’re already well into retirement, there are steps you can take to minimize the impact on your wallet.

How much does Medicare cost?

If you’ve paid taxes for most of your life, you won’t be charged a premium for Medicare Part A. However, you will be charged a monthly premium for Medicare Part B, which covers doctor’s visits and outpatient care. The exact amount you’ll pay depends on your income. In 2022, most people will pay a minimum of $170.10 per month, with a minority paying as much as $570. This amount changes from year to year, however, and will likely go up in 2023 and beyond. 

Even with premiums, you’re also expected to pay a deductible before your coverage kicks in, after which you’ll still be responsible for copayments and coinsurance. This can add up quickly, leading to some pretty shocking medical bills. 

Compounding the problem is the fact that, unlike private insurance, Medicare has no out-of-pocket maximum. Should you require an extensive amount of treatment in a given year, you could pay tens of thousands in cost-sharing.  In the face of these insane U.S. health care costs, you need to plan how to protect your retirement savings as soon as possible.

Bolstering the Bank

Social Security Card

Obviously, putting more money into your retirement savings will lead to having more money when you retire. The exact way to do that, be it through investments, a 401k, or similar programs, is best discussed with a financial planner. However, there are things you can do on the Medicare side of the equation to get some extra coins into your piggy bank. 

Wait Out Retirement

Retiring early is the dream, but it seems like you’ll actually be punished for it if you’re not careful. One major source of income for many retirees is Social Security, that monthly check meant to supplement your retirement savings. In a best-case scenario, this will cover your entire monthly premium without you needing to think about it. However, the earlier you take it, the less money you get. Waiting until you turn 70 maximizes the monthly payout, giving you a bit more breathing room.

DO NOT Wait to Enroll in Medicare

While stalling Social Security is wise, putting off Medicare is not.  Your Initial Enrollment Period begins three months before your 65th birthday and lasts for a total of seven months. You need to enroll during this period. If you don’t, you’ll have a late enrollment penalty added to your monthly premium. This penalty does not go away. It is a lifelong penalty. Don’t let procrastination raise your average health insurance cost.

If you’re still employed, you can continue to benefit from your own or your spouse’s health insurance, but it’s important to at least enroll in Medicare at this stage.

Consider a Health Savings Account

A Health Savings Account (HSA) is a special, tax-free savings account that allows you to set aside money for health expenses. It, along with its close relative, the Flexible Spending Account (FSA) are two benefits offered with certain insurance plans, allowing you to set aside some extra funds for health emergencies. You’ll save money on your taxes, and you’ll have an emergency cushion as well.

Check your Medicaid Eligibility

There are a variety of plans in place designed to help make Medicare more affordable, like PACE and Medicare Savings Programs. However, you may also qualify for Medicaid coverage depending on your state and financial situation. 

Medicaid works in conjunction with Medicare to cover the majority of your health care expenses, and there is no penalty for checking your eligibility. You may even be able to subtract your medical expenses from your total income for the purpose of qualifying. You might also qualify for extra help paying for Part D premiums, even if you do not meet the requirements for Medicaid.

Medicare Advantage, Medigap, and Medicare Part D

Medicare Cards and dollar bills

Medicare Advantage and  Medigap are privately offered insurance programs designed to supplement or replace Original Medicare, but did you know they can also save you money?

It seems counterintuitive; why would buying more insurance cost less money? The answer is complicated, but part of it is rooted in how insurance works as a concept.

Insurance works by collecting money from a wide swathe of people, the policyholders, and then storing it in a collective fund. When someone has an emergency, money is dispensed from that fund to cover their expenses.

Now, because most forms of insurance are a business, it is in the best interest of the insurance company to make sure that the risk of a catastrophic payout is as small as possible. That way, they can use a portion of the fund for upkeep and profit. They do this by trying to minimize risk, which is what makes health insurance such an anomaly in the industry.


Typically, insurers will avoid taking on high-risk policies, and will otherwise act to minimize their financial risk. If you’ve ever gotten a speeding ticket, you’ve probably noticed your car insurance premium go up. You’re deemed a higher risk, so you need to pay a higher premium in order to compensate for the potential financial impact you’d have on the total fund. 

Health Insurance used to be able to do this, denying people coverage based on pre-existing conditions and charging people who were sick or unhealthy higher premiums. However, the Affordable Care Act put a stop to those practices. In the U.S., an insurer must take you on as a client if you enroll. Instead, the risk is mitigated in other ways: partially through preventive services like testing and checkups, but primarily through cost sharing. 

Cost sharing, which takes the form of deductibles, co-payments, and co-insurance, means that your insurer will only cover a portion of your health care costs. While insurers cannot force you to pay higher premiums due to health conditions, you can elect to choose to pay a bit extra for a plan that covers all of your cost-sharing obligations. This means your month-to-month costs are a bit higher, but your average health insurance costs are spread out over a lifetime of payments, rather than coming in a single, devastating bill. 


That’s how it works for traditional health insurance. When it comes to Medicare, however, there are some added twists that can save you additional money. First: Medicare is exempt from the out-of-pocket maximum rule. Private insurers, like Medicare Advantage, are required to step in after your total expenses reach a certain amount.

Private insurers also have more leeway when it comes to negotiating prices than Medicare does. Most Medicare Advantage providers are companies you’ve probably heard of, or may have even been insured by in the past. These companies are able to leverage their existing networks and negotiations for Medicare Advantage policyholders, resulting in lower overall costs. In fact, many Medicare Advantage plans have a $0 monthly premium. 

An additional incentive offered by some Medicare Advantage plans is the Medicare Give Back Benefit, which can pay some or all of your Part B premiums. This way, it is possible to pay less with Medicare Advantage than you would otherwise, while still reaping additional benefits. Researching the plans available in your area is critical if you’re looking to save money.

Another potentially cost-saving option is a Medigap plan. These plans are standardized and can cover your deductibles and cost-sharing obligations, as well as offer additional benefits. However, you cannot have both a Medigap and Medicare Advantage plan, and the benefits offered by Medigap are often less comprehensive than their Medicare Advantage alternatives

While we can’t help you plan your 401k, we can help you find affordable insurance. Contact our licensed insurance agents at (800) 950-0608 or enter your zip code to begin comparing plans today.

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