Health care costs are eating into Social Security checks

Keep in mind that future costs will vary from person to person, depending on factors like your gender, how healthy you are, where you live, and how many years you’ll live.

“Healthcare costs in retirement come with sticker shock because employers typically pick up 70-plus percent of an employee’s health insurance premium,” HealthView Services CEO Ron Mastrogiovanni told Yahoo Finance. “But when people retire, they are responsible for 100% of health care costs for 20 or more years, increasing at an inflation rate of about 6%.”

Your Medicare Advantage plan is unlikely to be a panacea. More than half of beneficiaries now opt for Medicare Advantage coverage, but they should also be prepared to feel the sting.

These plans have an Achilles’ heel. “Medicare Advantage seems like a very good deal for people in the early parts of their retirement because there are often no premiums,” Rutledge said, “but if you start needing a lot of care from providers that aren’t part of your plan’s network, that clear benefit diminishes as you go along.”

Carolyn McClanahan, a certified financial planner and therapist, agrees.

“Out-of-pocket costs are rising, and more people are signing up for Medicare Advantage plans, and while the cost seems cheaper for enrollees than traditional Medicare, once they get sick and need services, Medicare Advantage plans tend to have higher out-of-pocket costs,” she said.

When things go south. “At that point, a Medicare Advantage consumer is left without the care they want unless they’re willing to pay out of pocket,” she said.

Traditional Medicare, on the other hand, rarely requires prior authorization for health services or drugs.

Have questions about retirement? Personal finance? Is there anything related to career? Click here to note Kerry Hannon.

Here are some ways to prepare for and manage out-of-pocket medical expenses in retirement:

Stay on the job for a few extra years. If possible, work longer hours and stay on your employer’s insurance as long as you can while building savings.

Create a Health Savings Account (HSA). If you’re retiring early, increasing HSA contributions may be a smart move. An HSA lets you put money in on a tax-free basis, withdraw that money tax-free, and withdraw it tax-free for qualified health care expenses. (Some states assess state taxes.)

Pushing back on claiming your Social Security benefits. If you can afford it, delaying tapping into your benefits until age 70 will provide a larger monthly check for the rest of your life — useful, if you face hefty health care bills as you age.

Here’s how it works: You can take Social Security at age 62, but your full retirement age (FRA) can be cut by up to 30% of your benefits. For anyone born in 1960 or later, your full retirement age is 67. If you delay your full retirement age until age 70, you earn late retirement credits. They come in roughly 8% increments for each year until you reach 70 and the credits stop accruing.

Budget for costs. It’s important to make future health care costs a part of your retirement planning budget and factor potential unexpected health care costs into your emergency fund, McClanahan said.

“The system is so broken, and health care is now completely a business,” she added. “The only advice I can give people after retirement is to make sure they become engaged patients and question the care provided and what they are being charged for those services.”

Kerry Hannon is a senior columnist at Yahoo Finance. He is a career and retirement strategist and author of 14 books, including “Retirement Bites: Gen X’s Guide to Securing Your Financial Future,“”In Control at 50+: How to Succeed in the New World of Work,” and “You’re never too old to be rich.” Follow her Bluesky and X.

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