The Looming Retirement Healthcare Crisis Gen X Can't Ignore

You don't want to be clueless

Getting old sucks.

When you get out of bed in the morning, you sometimes wonder, “Why the heck does that hurt?”

You don’t want to be Cher in Clueless—you need to plan for healthcare costs in retirement.

Healthcare is one of the most underestimated expenses as millions of Gen Xers start to hit retirement age. If you think you have conquered financial pressures such as helping your kids with college and assisting your parents—those will seem minor by ignoring future healthcare expenses.

Exploring some key healthcare expenses that you should be planning for will help you think about how to budget for them in the future.

We won’t stay healthy forever, so it’s better to think about them now rather than later.

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Medicare's true price tag

People think that once they reach the age of 65 and can collect Medicare benefits, they will be fully covered for any medical expenses. Unfortunately, that’s not the case—Medicare isn’t free.

As a bonus to being able to get the blue plate special at your local restaurant, you’ll be paying premiums for the rest of your life. And as a kicker you get to pay other out-of-pocket costs.

Here’s the breakdown:

• Medicare Part B (aka medical insurance) comes with a monthly premium, which is income-adjusted. Say you made over six figures in your last job—the more you will pay for Medicare. If you made less, you’ll pay a smaller premium. That premium excludes your prescription drugs, so you’ll need Part D. That portion also has a premium.

• Doctor visits, hospital stays, and other services require deductibles, copays, and coinsurance. For prolonged illnesses the expenses can add up quickly.

• The government even charges a penalty for late enrollment in Part B or Part D, which could mean higher premiums for life. So, if you are always late, you may want to plan on being on time for that appointment.

Let’s run the numbers.

A healthy 65-year-old man retiring with a Medicare Advantage plan in 2024 is projected to spend $128,000 on healthcare during his retirement.

Yeowch. I have that to look forward to…

For a healthy woman the same age? That figure jumps to $147,000.

Both of these examples assume you're in relatively good health. If you have chronic conditions, expect to spend even more.

Prep for these costs like a healthcare doomsday prepper—start socking away dollar bills in tin cans in the root cellar.

“Old people can be so sweet.” —Cher in Clueless

Plugging the holes in Medicare

My spouse turned 65 this year, and I thought that Medicare would cover all of her medical expenses. 

Wrong. 

We needed to add one of the Medicare Supplemental Insurance plans (Medigap) policies to cover those crappy deductibles and copayments (she chose Humana). Otherwise, you can bolt on one of those Medicare Advantage plans that give you access to benefits like dental or vision. These aren't free—these options have their own price tags.

Adding all these options makes it sound like we are ordering from a drive-thru menu... I wonder if we can Supersize the Part D plan for extra drugs. 

That's why planning for that gap is crucial, if you fail to think ahead you might be diving into your retirement savings faster than you anticipated.

“My father's too distracted by his bald spot to do anything.”—Mindy in The Spongebob Squarepants Movie

When healthcare becomes a costly marathon

This is the big, scary monster in the closet—and it's the one nobody likes to talk about. 

Unfortunately, for most of us, long-term care may be a necessity as we age. It could be an assisted living facility, in-home care services, or a nursing home. Even though we've visited someone in one of these facilities or have a family member in one, Gen X doesn't want to think about those options as they age. 

Almost 75% of Gen Xers aren’t planning for long-term care or assisted living as a part of their retirement. Disregarding these costs could make you a pauper when you need the money the most.

If you think Medicare will cover these expenses, you'll be mistaken. Long-term care is rarely covered by Medicare, which means you'll have to pay for any of these expenses out-of-pocket or rely on long-term care insurance (if you have it). 

This whopper of an expense can suck a retirement account dry without planning for it properly. Without proper planning, these expenses can easily drain retirement savings.

“I'm pretty tired. I think I'll go home now.”—Forrest Gump in Forrest Gump

Medication costs that keep on giving

Everything is getting more expensive, and prescription drugs aren’t getting any cheaper.

Some out-of-pocket costs might be reduced by the Inflation Reduction Act, but you should still plan for:

• Ongoing medication costs for chronic conditions, like high blood pressure or diabetes.

• Rising drug costs, pharmaceutical companies are always developing new (and probably) more expensive medications.

Sadly, Medicare Part D isn’t comprehensive, so you’ll need extra cash to cover overages.

“Most people don't know how they're gonna feel from one moment to the next. But a dope fiend has a pretty good idea. All you gotta do is look at the labels on the little bottles.” — Bob in Drugstore Cowboy

Often overlooked health essentials

I mentioned before that Medicare doesn't cover dental or vision care.

So, you’ll need supplementary insurance for dental check-ups, eye exams, and glasses. As you get older, you’ll probably need major dental work, new glasses, or eye surgeries (you probably know someone with cataracts).

If you haven’t saved for these expenses or insurance, you’ll be shelling out some dough for them.

“You wouldn't hit a guy with glasses on, would you? Huh?” — Joker in Batman

Outpacing inflation in healthcare

Everyone has been talking about inflation over the last year, but if you thought that was bad, healthcare inflation outpaces regular inflation.

As if retiring wasn’t hard enough, healthcare costs will be higher when you retire. This means you need to remember that things are going to more expensive when you try to estimate your future healthcare costs.

Just aim high, not low.

“That is correct. Money is outmoded. All transactions are through codes.” — Lenina Huxley in Demolition Man

Insuring the in-between years

I needed to take advantage of the Health Insurance Marketplace created by the Affordable Care Act (ACA) when I was self-employed.

If you retire early, you’ll need to look at that as an option. You’re stuck in healthcare no-man’s land if you plan to retire before 65.

Another choice may be private insurance, but the expenses could be pretty steep if you have pre-existing conditions.

If you’re working and getting health insurance from your company, you may underestimate the cost. Deductibles are usually quite high, and coverage is more expensive than people anticipate.

You’ll also be draining that nest egg early, which could crimp your retirement plans.

“That kid's long gone. This old man is all that's left. I gotta live with that.” — Ellis Boyd Red Redding in The Shawshank Redemption

Closing thoughts

By now, you get the gist—healthcare costs in retirement aren’t optional, and they aren’t cheap.

The sooner you start planning for these costs, the better your retirement will be.

Take a long look at your retirement strategy, and if healthcare isn’t at the top of the list, you may need to reprioritize it.

Your wallet will thank you.

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