WSJ Your Money Briefing - The Underestimated Cost of Healthcare in Retirement

Episode Date: June 16, 2025

As retirees get older, they could face additional costs including medication and doctors visits that could add tens of thousands of dollars to out-of-pocket expenses. Host Oyin Adedoyin talks with WSJ contributor Gail Marks Jarvis about how to prepare for unanticipated healthcare expenses in retirement.    Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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There have been some estimates that have said that the average couple, instead of thinking they're going to spend $330,000, that maybe they'll have to spend over $600,000. That takes into account more of these unusual expenses that people may have to pay. We'll talk with Wall Street Journal contributor, Gail Marks Jarvis, about where these sneaky medical costs come from and how to prepare for them.

That's after the break. Americans tend to enter retirement in relatively good health, but as they age, their health may start to deteriorate, which could lead to recurring expenses that can squeeze even the most affluent retirees. Wall Street Journal contributor Gail Mark-Stravus joins me to talk about it. So Gail, planning for retirement is kind of like trying to see into the future in some ways. We're estimating how much money we're going to need to live comfortably in our 60s and 70s. Your reporting has shown that medical costs can be a blind spot in that crystal ball. Why is that? Well, in part, it's because it's hard to know just what's going to happen to you medically. So a lot of people are going to go through retirement and spend about what fidelity estimates,

which is during all of retirement, about $330,000 for a couple and about $165,000 for an individual. But you don't know if you're that average. What happens if you get sick and need drugs that are not covered by your drug plan? Or what happens if you think you're really healthy when you're young and you move out to some isolated area and you get sick? So your expenses could be huge.

Those are some pretty interesting numbers. Let's say that I'm a retiree with a pretty healthy nest egg saved up like that. Guidance from Fidelity says that retirees should have 10 times their salary by the time they're 67. How much of this is estimated to be eaten up by those medical costs that you mentioned? If you have saved that 10 times amount and you are average, you're probably going to be okay in terms of your medical costs. But if you start doing unusual things like going to a mountaintop to live in retirement where there's no doctors around or no good hospitals, that's going to change considerably. There have been some estimates that have said that the average

couple, instead of thinking they're going to spend $330,000, that maybe they'll have to spend over $600,000. That takes into account more of these unusual expenses that people may have to pay. One of the things that you explain in your story as one of those unanticipated costs is Part D Medicare. Can you talk a little bit about how that works and how that can add to those costs when you're retired? Just a few years ago, they added a new part of Medicare and it's called Part D. And that's what's supposed to cover your drugs.

You pay a premium every month, just like you pay a premium every month for Medicare. Medicare only pays about 80 some of your drug costs. But the key about Medicare Part D, the drug insurance, is that you are only covered by what your policy says they cover. What people don't realize is that their drug coverage is based on something called the formulary list that every drug plan has. And every drug plan is different. If you bought a drug plan and I bought a drug plan, each one would have a different formulary list. So maybe a cancer drug would be covered in yours but not

mine. So what do you do about that? If you're stuck with a drug that costs $9,000 and your plan doesn't cover it, for that year you're going to have to pay the $9,000. But at the end of the year you have the right to shop for a new drug plan. And what you can do then is pick a new drug plan that does have that expensive drug on the formulary list. And so instead of having to pay $9,000 again the next year, you pay only $2,000. Wow, those costs are really adding up. Gail, what are some possible solutions and ways that people can either prevent the situation

or navigate it? Before they ever retire, while they're still on regular insurance, go to that community that they think they're going to live in, find a doctor, and get accepted by that doctor as a patient. They still could get turned down later when they go on Medicare, but doctors tend to continue to take patients that they have had even when they go on Medicare.

The second step is just to realize that, for example, Florida is a place people go to cut their taxes, but they may have extra expenses, like they may pay more for medical care. So all of these things are things to think about in advance of retiring. Speaking of in advance, Gail, I'm 25. This is all blowing my mind right now. I have a 401K through my job and that's it. What can I do now to ensure that I don't end up in that predicament where I'm underestimating future medical costs by the time I'm retired?

Well, it sounds like you're aware of the rule of thumb that you go to retire on at least 10 times what you were making. But the other thing is every year, you should try to maximize what you're putting in your 401k, and you should make sure that you're at least getting the employer match.

I have been shocked at the number of young people who say, oh, I have student loans, I'm busy, I can't figure out the 401k. And they skip it, even though their employer would give them free money. Some of that free money, if you start in your 20s, that's liable to be like $250,000 of free money by the time you go to retire. So you don't want to ever give up that free money. That's WSJ contributor Gail Marks Jarvis. And that's it for your money briefing. This episode was produced by Ariana Osborne with supervising producer Melanie Roy.

I'm Oyan Adedoyan for The Wall Street Journal. Thanks for listening. And I'll see you next time. Bye!