Budgeting For Retirement: Potential Health Insurance Costs

One common budgeting oversight we see from members planning their retirement is comparing their estimated future pension amount against their current monthly bills to see if they can afford to retire. The oversight? Focusing on what their bills currently are, not what their bills will be. This is especially true when it comes to health insurance costs – and even more so if you won't be 65 and Medicare-eligible when you retire.

Many don't think about health insurance costs changing after retirement, but it can be an unwelcome surprise. Remember: while working and receiving health insurance benefits through your employer, your employer is likely either partially or fully subsidizing your health insurance, lowering the cost to you. The same is true when you're 65 and Medicare-eligible – the government starts subsidizing your healthcare costs.

Example of H.I. CostsBut what happens if you retire before 65? You're likely going to be paying the full, unsubsidized cost of health insurance. As an example of potential costs, for 2021, non-Medicare ASRS retirees who choose to get their insurance through us are paying a monthly premium of $775-$1062 for single coverage. The monthly premium jumps to $1,550 - $2,124, depending upon the plan option, to cover themselves plus one other person. (Note: these are prices for non-Medicare retirees living in-state – those living out-of-state have a separate plan option available to them with different pricing.) 

In contrast, let's look at monthly premiums for Medicare-eligible ASRS retirees. It ranges from $0-$67 a month for single coverage living in-state. For "single +1" coverage, it ranges from $0 - $134. (Yes, many of our Medicare-eligible retirees have medical insurance through the ASRS at no cost!) It is important to remember, however, that these costs will fluctuate. For example, in 2017, Medicare-eligible ASRS retirees paid $174-$332 a month for coverage through the ASRS. While currently we're able to offer a zero-cost option for that same group, many factors determine these costs and it's impossible to know what premiums may be in future years.

What does all of this mean for you? If you're within five years of retiring, start doing some research. Think about how old you'll be when you want to retire and how that might impact your health insurance options. Log into your secure myASRS account at AzASRS.gov and look at your pension estimates to get an idea of what your pension benefit may be. Perhaps check out our current Health Insurance Enrollment Guide to look at our current health insurance options and their monthly premiums. After that, ask yourself some questions: Where do you anticipate getting your insurance from when you retire? What are their current rates? How do those numbers impact your projected budget? Simply sitting down and doing the math will go a long way in getting you prepared!

Related Information

      • As part of your ASRS benefits, you may be eligible for a Health Insurance Premium Benefit when you retire, in which the ASRS pays a portion of your monthly premiums to your health insurer. For more information on benefit amounts, and to see if you will be eligible when you retire, visit our Premium Benefit page of AzASRS.gov.
      • If you're about to retire and comparing health insurance plans, don't forget about your total out-of-pocket health care costs, rather than just the monthly premium. Other costs, including deductibles, copayments, and coinsurance, may have a significant impact on your total spending on health care – sometimes more than the premium itself.
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