You will only have this amount of Social Security left after you pay your medical bills in retirement

SmartAsset: how much retirement income you will have after paying your medical bills

Retirees face hefty charges for premiums, co-payments and uncovered services. One way to gauge this burden is to look at how much these medical costs eat into their Social Security benefits and other income. Here’s an overview of how much these expenses will reduce your retirement income and what options you have to improve on these reductions. A financial advisor can help protect your retirement against medical and other expenses.

How much medical expenses reduce retiree income

Retirement income can come from a variety of sources. The best known is Social Security, but it can also come from annuities and other insurance products, tax-advantaged plans like IRAs and 401(k), profit-sharing plans, and the sale of assets. , including titles. Despite the variety of sources of income that retirees can draw from, that income can be hit hard by medical expenses.

Boston College’s Center for Retirement Research analyzed data from the 2018 Health and Retirement Study to calculate the share of Social Security benefits and total income available for non-medical expenses. The center also explored how this measure differs by gender, age, health status, income, and supplemental insurance coverage.

What the researchers found is that for the median retiree, out-of-pocket medical expenses, including premiums, cost-sharing, and uncovered services (excluding long-term care), leave only 75% of Social Security benefits available for other expenses. This percentage is lower for women and people from low-income households.

Who is hardest hit?

SmartAsset: how much retirement income you will have after paying your medical bills

SmartAsset: how much retirement income you will have after paying your medical bills

For women, the remaining median share is 72% of social security benefits compared to 78% for men. This is not because women pay considerably higher health costs than men – their premiums are slightly lower and their other out-of-pocket payments are slightly higher – but because they have considerably lower Social Security benefits. Among the cohort of retirees who spend the most, 5% of retirees only have 11% of their benefits left after disbursements. Even at the 10th percentile, retirees spend all but one-third of their benefits on out-of-pocket costs.

The guilty? Premiums for Medicare Parts B — which are rising — Part D, Medicare Advantage, and supplemental plans, including retiree health insurance, account for the largest share of medical expenses for most retirees, with the exception of those who spend the most.

How to reduce healthcare costs

There are different ways to reduce medical costs, but three stand out.

Eat and exercise. Exercise and a balanced diet low in salts, saturated fats and sugars can keep you fit and lean. It can also prevent diabetes, heart disease, obesity and will also boost your immune system. It may seem like a daunting task, but even a little exercise each day can have profound impacts. Recent research suggests that short bursts of intense exertion followed by periods of rest can dramatically increase your fitness level. Even seven-minute workouts have been shown to have a positive impact on your health.

Adopting a predominantly plant-based diet while adding small amounts of meat (flexitarianism) and dairy products has many proven benefits:

  • Lose excess weight and maintain your ideal weight

  • Put less pressure on the environment

  • Tame your cravings for junk food and constant snacking

  • Stretch your dollar

Stop smoking. You know how terrible cigarettes are for your health and how expensive that pack is. Whatever you have to do to quit this habit will be worth it not only for your heart and lungs, but also financially. You can potentially avoid healthcare costs and save money on a daily basis. If you are a smoker, you can start saving instantly by choosing not to smoke. Everyone who loves you will breathe easier, just like you and your wallet.

Flexible spending accounts. Contributing to a Flexible Spending Account (FSA) can help pay for medical expenses when you need them, and the FSA is exempt from Federal and Social Security taxes. In some cases, FSAs even avoid local and state income taxes. Check with your employer if this is an option for you.


SmartAsset: how much retirement income you will have after paying your medical bills

SmartAsset: how much retirement income you will have after paying your medical bills

Boston College’s Center for Retirement Research found that with a substantial portion of retirees’ income spent on medical expenses, their finances are more precarious than Social Security benefit levels alone would suggest. With out-of-pocket healthcare costs reducing available retirement income and rising Part B premiums, it’s understandable that many retirees feel it’s hard to make ends meet. Fortunately, there are free options that retirees can use to ease the financial strain.

retirement advice

  • Reducing medical costs is only half the battle; increased income is the other half. A financial advisor can help you increase your income. Finding a qualified financial advisor doesn’t have to be difficult. SmartAsset’s free tool connects you with up to three financial advisors who serve your area, and you can interview your matching advisors for free to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, start now.

  • Use SmartAsset’s free retirement calculator to see how you’re preparing for retirement.

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