Will You Spend Less on Healthcare in Retirement If You Sign Up for Medicare Advantage?

It’s not really a secret that healthcare costs can be a huge burden for seniors once they leave the workforce behind. In fact, a recent report by the Employee Benefit Research Institute found that a senior couple with notably high prescription drug costs will need a whopping $383,000 in savings to have a 90% chance of covering their health costs in full during retirement.

But that same report found that enrollees in Medicare Advantage plans can generally get away with saving less for healthcare and still meeting their needs. In fact, couples who sign up for Medicare Advantage might only need $184,000 to have a 90% chance of covering their healthcare costs in retirement (“only” being a relative term, of course).

If you’re nearing retirement and are gearing up to sign up for Medicare, you may want to consider getting an Advantage plan. But it’s important to understand the pros and cons of going this route.

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Is a Medicare Advantage plan right for you?

Once you retire, your income might be whittled down compared to the paycheck you were getting from work — especially if you don’t bring much savings with you into retirement and become heavily reliant on Social Security. That’s why it’s so important to do what you can to keep your healthcare costs to a minimum.

But will enrolling in a Medicare Advantage plan help you achieve that goal? Well, it might.

The thing to understand about senior healthcare costs is that the amount you wind up spending will hinge largely on the specific state of your health. So if you’re someone who ends up encountering a lot of issues, you might spend more on healthcare in retirement than expected, regardless of what sort of coverage you choose.

That said, there are different reasons why a Medicare Advantage plan may be a better bet from a financial standpoint. For one thing, many Advantage plans cover services that original Medicare does not — notably, dental cleaning, eye exams, and hearing aids. Some Medicare Advantage plans offer supplemental benefits on top of these that can result in savings, too.

Also, with Medicare Advantage, there’s a cap on how much money you’ll spend out of pocket each year on healthcare costs. With original Medicare, no such limit exists, so you’re taking a risk there.

On the other hand, you should know that Medicare Advantage plans will generally limit you to a much more narrow network of healthcare providers than original Medicare. And if you’re someone who plans to split your time between two different states as a retiree, an Advantage plan may not be a great solution for you.

Also, to be clear, you’re not guaranteed to save money on healthcare by enrolling in Medicare Advantage. And if you choose the wrong plan, you might end up spending more than you need to.

Do your research

The decision to enroll in Medicare Advantage versus original Medicare is a personal one. And it’s one you should think about carefully.

Before you make that call, research different Medicare Advantage plans to see what costs and benefits they come with. Only once you have that information will you be in a good position to make an informed decision.