Suze Orman’s Top Warning About This One Common Retiree Expense — Do You Pay It?
Written by
Kellan Jansen
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Molly Sullivan
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Most people try to keep expenses down in retirement to maximize what they get from savings. But while this strategy works for housing and entertainment, it’s not one you can count on with healthcare.
As of 2024, the average retired couple can expect to spend about $395,000 on healthcare after age 65. If you think Medicare will protect you from that, you may be mistaken — at least according to Suze Orman.
The Unexpected Costs of Medicare
Orman recently warned seniors that although it often appears cheap, Medicare can be anything but. A key reason is the unexpected costs associated with different plans. For example, although most enrollees qualify for free Medicare Part A premiums, the plan has an inpatient hospital deductible of $1,676 per stay. That can quickly ruin a budget and disrupt an otherwise peaceful retirement.
Original Medicare also doesn’t provide any coverage for commonly used services like dental, hearing and vision. These costs can add up over time, eating into your savings.
Retirees who want expanded coverage beyond Original Medicare will need to pay extra for Medicare Advantage. This will increase your monthly premium and may still leave you exposed to high out-of-pocket expenses for certain forms of care.
Orman’s main point is that Medicare may not keep your health expenses as low as you expect them to be in retirement. That makes it important to think carefully before choosing a plan. Consider how different types of Medicare can create unexpected healthcare costs, and make sure you leave room in your budget to address them.
Orman’s Recommendation for Retirees
Your Original Medicare plan may come with a variety of unexpected costs, which can add up and disrupt your budget. That’s why Orman recommends signing up for a strong Medigap policy.
She says, “You are responsible for 20% of your Part B expenses … This is why anyone with Original Medicare should also have a robust Medigap policy. It will cover that 20% you are on the hook for.”
Medigap policies are specifically designed to fill the holes in Original Medicare coverage. They can reduce the amount you pay out of pocket for deductibles, copayments and coinsurance. Plus, you’ll get expanded coverage for things like hospitalizations, lab tests and home healthcare.
Orman recognizes that you’ll need to pay more on a monthly basis for Medigap supplemental coverage. But that’s worth doing, in her view. By paying a bit more monthly, you can avoid most of the major healthcare expenses that Original Medicare leaves uncovered.
Other Tips for Managing Healthcare Costs in Retirement
Healthcare is one of the biggest line items in a retiree’s budget. But there’s a lot you can do to manage these costs. For example, if you’re still working, you could make tax-deductible contributions to a health savings account. These earnings grow without incurring taxes, leaving you more for healthcare costs in retirement.
If you’re a high earner, you may also want to look into strategies for decreasing your modified adjusted gross income. This is what your Medicare Part B premium is based on — ranging from $185 to $628.90 depending on what you earn.
Finally, exercising regularly can also reduce healthcare costs in retirement significantly. A study of nearly 25,000 Canadian seniors found that those who did regular physical activity had significantly reduced hospitalizations, lengths of stay and overall healthcare costs.
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