Understanding Medicare and Healthcare Costs in Retirement
Healthcare costs are one of the most significant and often underestimated expenses in retirement. For retirees in Leawood and Kansas City, understanding how Medicare works—and what it doesn’t cover—is essential for protecting both your health and your financial future. Building a retirement plan that accounts for healthcare costs can prevent unwelcome surprises and help you enjoy peace of mind.
Medicare is the primary health insurance program for Americans aged 65 and older. While it offers important coverage, it doesn’t pay for everything, and there are multiple parts to understand. Original Medicare is comprised of Part A and Part B. Part A covers hospital stays, skilled nursing care, hospice, and some home healthcare services. Most people do not pay a premium for Part A.
Part B covers doctor visits, outpatient care, preventive services, and medical equipment. There is a monthly premium for Part B, which is adjusted based on your income. In 2024, most retirees pay around $174 per month, but those with higher incomes may pay more due to IRMAA (Income-Related Monthly Adjustment Amounts).
However, Original Medicare has gaps. It does not cover prescription drugs (Part D), dental, vision, or long-term care. That’s why many retirees opt for supplemental coverage. You have two main choices: a Medicare Supplement (Medigap) policy or a Medicare Advantage (Part C) plan. Medigap plans cover out-of-pocket costs like deductibles and coinsurance, while Medicare Advantage plans combine coverage from Parts A, B, and often D into a single plan.
Both options have pros and cons. Medigap offers flexibility in choosing providers and often covers more expenses, but premiums can be higher. Medicare Advantage plans usually have lower premiums and include additional benefits like gym memberships and dental coverage, but they require you to use a network of providers and may have more restrictions.
Another major consideration is prescription drug coverage. If you choose Original Medicare, you’ll need to enroll in a standalone Part D plan. Premiums and coverage vary, so it’s important to review plans annually to ensure your prescriptions are covered affordably.
Beyond Medicare, long-term care is a potential cost that many retirees overlook. Medicare only covers short-term stays in a skilled nursing facility following hospitalization. It does not cover custodial care, such as help with bathing, eating, or dressing over an extended period.
To prepare for this possibility, retirees in Kansas City and Leawood may consider long-term care insurance, hybrid life insurance policies with long-term care benefits, or creating a separate savings strategy to cover these costs. The average annual cost of a private room in a nursing home in Kansas exceeds $80,000, making this an important piece of any retirement plan.
Healthcare costs also include premiums, copayments, dental and vision expenses, and potential out-of-pocket surprises. Fidelity estimates that the average 65-year-old couple retiring in 2024 will need approximately $315,000 to cover healthcare expenses in retirement. This figure does not include long-term care.
Working with a retirement advisor can help you anticipate these expenses and incorporate them into your broader financial plan. At Prevail IWS, we assist retirees throughout the Kansas City metro area in evaluating sources for Medicare options, estimating future medical costs, and structuring investment and income strategies to prepare for them.
Healthcare planning also ties closely with tax and income planning. For example, higher taxable income can increase Medicare Part B and D premiums. Roth conversions and strategic withdrawals can help manage income levels and keep healthcare premiums in check.
In retirement, good health is priceless—but it comes at a cost. By understanding Medicare, comparing supplemental options, planning for long-term care, and accounting for rising medical expenses, you can protect your finances while prioritizing your well-being. At Prevail IWS, we help retirees in Leawood and Kansas City prepare for every stage of retirement—including healthcare—so they can live with confidence and security.
