7 Ways Retirees Can Prepare For Rising Medicare Costs in 2025
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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When saving for healthcare costs in retirement, it’s easy to forget about inflation, which continually drives up not only your Medicare premiums, but other costs, such as prescription drugs and copays.
While you can’t slow the roll of inflation, you can take some actions to help manage these additional costs.
Experts explained the best ways retirees can prepare for rising Medicare costs in 2025.
Reevaluate Your Medicare Drug Plan
First, it is critical for anyone currently on Medicare to check out Medicare.gov to see if their drug plan is still the most cost-effective way for them to have coverage, according to Scott Maibor, managing director of Senior Benefits Boston.
“Due to the Inflation Reduction Act and the resultant changes in Medicare drug plans, inexpensively covered drugs may have changed tiers and are no longer cheap or may not be covered at all. The deadline to change plans is Dec. 7, 2024.”
Assess Your Medicare Supplement Plan
Next, for those on Medicare Supplements, Maibor urged you to reconsider your Supplement Plan. “Do not assume that a plan you have been on for years is still the best for you, even if you are satisfied with it.”
For example, he said, Plan F is outdated and overpriced. Plan G is the current go-to and could save almost $200 per month per person for nearly identical coverage. Plan N is even less expensive than Plan G and provides similar benefits.
Consider a Medicare Advantage Plan
Another approach is to consider a Medicare Advantage Plan, Maibor said, which can be a huge cost savings for those who don’t have large expected healthcare expenditures in the coming year.
“They not only save premium dollars over a Supplement but frequently have less expensive drug costs due to having little or no drug deductibles as well as embedded dental, vision, hearing aid and over-the-counter benefits which could, if utilized, be a great cost savings,” Maibor said.
In fact, there’s actually some good news for these plans in 2025, according to David Kindness, a CPA, tax expert and personal finance writer at Best Money.
“I’m seeing Medicare Advantage premiums drop to around $17 monthly, and about 60% of folks will have access to zero-premium plans. Part D premiums are also dipping slightly to $40 on average.”
Leverage a Health Savings Account
Aside from Medicare premiums, Kindness pointed out that retirees are often blindsided by other rising costs, such as deductibles, copays and prescription prices that keep creeping up.
“The real kicker is that a typical retired couple needs roughly $315,000 just for healthcare throughout retirement,” he said.
He suggested those who are still working should “pump as much money into [an HSA] as possible. The tax benefits are incredible. You get tax deductions on contributions, tax-free growth and tax-free withdrawals for medical expenses. Plus, you can use HSA funds to pay Medicare premiums later. My clients who maxed out their HSAs in their working years are in much better shape now.”
Adjust Your Investments Accordingly
It’s important to remember, too, that your retirement income affects your Medicare premiums through IRMAA (Income-Related Monthly Adjustment Amount), Kindness said.
“My retired clients often benefit from carefully timing their investment income and considering Roth conversions to keep their modified adjusted gross income in check.”
Look Into Medicare Assistance Programs
For folks struggling with costs even after making these adjustments, there’s help available through Medicare Savings Programs and Extra Help for prescriptions, Kindness pointed out.
“The income limits can be surprising — many people qualify without realizing it. Your local State Health Insurance Assistance Program can guide you through the application process,” he said.
Work On Your Health
Lastly, while the money side is crucial, staying healthy matters too, Kindness pointed out.
“My healthiest clients typically spend less on healthcare. They take advantage of Medicare’s free preventive services, stay active and catch health issues early. While there’s no guarantee, maintaining good health habits can help reduce medical expenses over time.”
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