Health Insurance Costs and Retirement

There can be a lot of costs to budget for when thinking about retirement, but have you ever looked into what your health insurance costs could be? If not, you’re not alone! Many people mistakenly think health insurance costs won’t change much when they retire, but that’s rarely the case. In fact, health insurance costs may impact when you’re able to retire or if you need to work after retirement.

What many don’t understand is that, while working and receiving health insurance benefits through their employer, their health insurance costs are partially subsidized by their employer. This means they aren’t paying the true full cost of their health insurance. Once retired and covering the total cost entirely, it’s easy to be caught off guard. Especially if you retire before you’re 65 and Medicare eligible.

If you’re under 65 when you retire, you may end up paying a premium of $700 - $1,000 a month for a single adult, at today’s rates. If you’re 65 and Medicare eligible, it’s more affordable but still substantial; potentially $150-300 a month for a single adult. Why does healthcare get cheaper when you're eligible for Medicare? Because the government begins to pick up part of your healthcare costs, much like your employer did when you were working. 

These costs will fluctuate, of course, and there are a lot of variables that can affect your personal health insurance rate, but it’s good to understand that health insurance rates in retirement are to be taken seriously.

The best course of action? If you’re within five years of retiring, start doing some research. 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.

If retirement is still a ways away for you, your best course of action is to save. A savings account that supplements your retirement from the ASRS is the best way to make sure you’ll have the financial means necessary for the lifestyle you anticipate in retirement. It may not be possible to know what health insurance will cost you by the time you retire, but it’s safe to say the costs aren’t going away. (Or down!)

For more information on current healthcare options available to retirees through the ASRS, visit https://www.azasrs.gov/content/health-care.

Written by Nathaniel Brengle, Strategic Communications

This article appeared in "Expanding Your Financial Horizons" (October 2018), a digital publication of the ASRS.


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