On numerous occasions, the need to put pre-Medicare healthcare costs in context arises with this conversation:
Me: “When would you like to retire?”
Client: “Well, I’d like to retire soon but know that I can’t. I have to work until at least age 65 so that I have health insurance…”
The client in the above dialogue might be right; he or she may indeed need to work until age 65. Pre-Medicare healthcare costs are a factor in the retirement decision and a significant one at that. But so is a mortgage, so is the need to buy a car, buy groceries, support family, etc. Every living objective that equates to a cost is a factor. Pre-Medicare health care costs play a role in the overall determination of whether you can afford to retire, but these are costs that are too frequently blown out of proportion.
Health insurance coverage prior to Medicare is a highly political and highly publicized topic. It is often in the news and is a part of our day-to-day conversations. The result is that it often seems like a bigger retirement factor than it actually is, and people ping to age 65 (the age of Medicare eligibility) because working until 65 means not having to bridge the gap between employer-provided insurance and Medicare—it means not having to worry about it.
This is why we encourage anyone evaluating their preparedness for retirement to take three steps to help them understand the impact of pre-Medicare health care costs on their retirement decision. By doing so, it’s not an unnecessary point of anxiety. The steps include, first, giving pre-Medicare health care costs appropriate context; second, knowing what it costs and how long one you will have to pay for it; and third, knowing what the worst case might look like. Taking these three steps helps you understand the impact and make a more informed decision about when to retire.