Managing Medical Expenses in Retirement: A Comprehensive Guide

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Last Modified March 17, 2022
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An important part of saving for retirement is setting aside funds for medical expenses. It’s important to be financially prepared so you’re not caught off guard.

Approximately 80% of retirees are confident they’ll have enough money to cover medical expenses in retirement, according to a recent survey from the Employee Benefit Research Institute.

This may be due in part to an overestimation of what Medicare — the federal health insurance program for people aged 65 and over, and those with disabilities — actually covers.

Medicare falls short in various coverage areas, placing more financial burden on the retiree.

Establishing healthy habits early on — such as regular exercise and a healthy diet — can help you avoid expensive health complications later in life.

However, genetics and other uncontrollable factors often lead to necessary medical care with high out-of-pocket costs. Having a financial plan for health expenses will give you peace of mind and will help streamline your transition into retirement.

Preparing for the Unexpected

As you age, your risk for chronic conditions such as cancer, diabetes, heart disease and stroke increases. This plays into why 77% of older adults have at least two chronic diseases.

Below are some facts about four of the most common chronic conditions in people 65 and older:


Genetic Predisposition

It’s important to be aware of your risk of developing these conditions, especially if you have a genetic predisposition. Hereditary genetic mutation can cause an increased risk of developing cancers of the breast, ovary, colon and prostate. Look into your family’s medical history, and if anyone has had a history of these cancers, it’s wise to consult a specialist who will give you a risk assessment based on genetic testing.

Lifestyle Factors

Lifestyle-related factors may also increase your risk of chronic conditions. For example, smoking increases your risk of developing lung cancer while exposure to asbestos can cause mesothelioma.

You can’t control a genetic predisposition, but you can do your best to make healthy lifestyle choices, including:

  • Reading up on the latest cancer research
  • Incorporating more healthy meals and less processed foods into your diet
  • Staying as active as possible.

All of these habits and more will help decrease your risk of cancer over time.

Understanding Cancer-Specific Costs

A cancer diagnosis can quickly derail retirement plans and drain savings. According to a recent survey conducted by The Mesothelioma Center, 63% of cancer patients and their loved ones reported financial struggles following a cancer diagnosis.

The more you understand cancer-related costs, the better you can prepare for them.

Not everyone pays the same out-of-pocket costs for cancer. Factors such as the location and length of treatment may affect your total costs.

Cities that have a higher cost of living tend to have higher health care costs, according to the American Cancer Society. A longer treatment period only adds to total expenses.

Be aware that your insurance and Medicare likely won’t cover all the costs. Whether or not you have supplemental insurance will also determine your out-of-pocket expenses.

Which Costs to Expect

  • Office Visits: This includes the fees you pay for clinic visits for treatment or visiting your provider for checkups. This is typically a copay.
  • Drugs: This includes anything prescribed by your doctor, such as chemotherapy and pain medication. This also may include over-the-counter drugs or medications to help manage side effects.
  • Lab Tests: Blood work, urine tests and other lab tests may be conducted during your appointment. These are usually billed separately from the copay.
  • Imaging: CT scans, MRIs and X-rays all have fees for the radiologists, equipment and medications involved.
  • Radiation: Fees associated with radiation therapy may vary depending on the type of radiation needed and how many treatments are required.
  • Surgery: This includes equipment, medications and fees for the surgeon and anesthesiologist as well as other relevant expenses.
  • Hospital Stays: Your hospital stay will likely include fees for nursing care, procedures and medications received.
  • Lodging: You may need to arrange a lodging situation if you receive care from a facility that’s far away.
  • Transportation: Remember to account for gas, public transportation, ride-sharing, airfare or other means to get to and from your appointments.
  • Home Care: Nurses and specialists will charge fees that cover equipment and medicines used for in-home treatment.

Funding Medical Expenses in Retirement

Health care will likely be one of your biggest expenses in retirement. That’s why it’s important to have savings that are specifically dedicated to medical costs.

Unfortunately, many retirees underestimate just how much to save.

How Much to Budget for Medical Expenses

Couples aged 65 and older who retired in 2019 can expect to pay $285,000 in medical expenses throughout their retirement, according to Fidelity Investments. Single women and men can expect to pay $150,000 and $135,000, respectively.

Estimated medical expenses in retirement

While Social Security and your 401(k) will provide income during retirement, they are not sufficient to cover these hefty medical bills. To ease financial stress and ensure you’re covered for any medical issues that may arise in retirement, you’ll need to look beyond the standard retirement savings funds.


A big reason why people tend to underestimate how much they’ll need for medical expenses in retirement is that they expect Medicare to cover most costs.

According to a 2019 Kaiser Family Foundation study, the average Medicare beneficiary still spent well over $5,000 out-of-pocket per year for medical expenses.

Amount of money the average Medicare beneficiary spends annually on health care

So what does Medicare cover? When enrolling, you’ll have two coverage options. Understanding what each option covers will help you prepare for expenses you’ll need to cover yourself.

  • Hospice care
  • Inpatient care
  • Mental health
  • Clinical research
  • Home health care
  • Ambulance services
  • Skilled nursing facility care
  • Durable medical equipment
  • Limited outpatient prescription drugs
  • Special needs plans
  • Private fee-for-service plans
  • Preferred provider organizations
  • Health maintenance organizations
  • Medicare medical savings account plans
  • Dentures
  • Most dental care
  • Acupuncture
  • Routine foot care
  • Cosmetic surgery
  • Hearing aids and fitting exams
  • Eye exams related to prescription glasses
  • Long-term care, also known as custodial care


Adequate insurance coverage will help make up for what Medicare doesn’t cover.

Many are surprised that Medicare doesn’t cover long-term or custodial care. This is where long-term care (LTC) insurance comes in. It’s a good idea to invest in LTC coverage even if you’re perfectly healthy right now. Approximately 52% of Americans 65 and older will eventually require some form of long-term care.

Some may not be able to afford LTC insurance premiums. In this case, opt for a life insurance policy that allows for an LTC rider, which lets you receive some of the death benefit while you’re still alive. You can then use this money to pay for long-term care expenses.

VA Benefits

Veterans have additional options for assistance in paying for medical bills in retirement.

The main way veterans can receive health benefits is through the Department of Veterans Affairs (VA). However, since veteran retirees are eligible for VA health care on a space-available basis, they shouldn’t rely solely on VA medical benefits.

In addition to VA care, TRICARE is a medical care service available for active duty military personnel and veterans. Retirees are eligible for regular TRICARE benefits until they turn 65.

Once enrolled in Medicare, they are eligible for TRICARE For Life (TFL). They will also lose dental coverage and will need to enroll in the TRICARE Retiree Dental Program. In most cases, TFL acts as a supplemental secondary coverage and kicks in after Medicare.

End-of-Life Planning

When you’re approaching retirement, part of careful planning should include an end-of-life plan. Having an end-of-life plan will ensure minimal burden on loved ones and will keep them from making rushed, ill-informed and expensive decisions on your behalf.

End-of-life medical considerations
  • Assign an Authorized User for a Bank Account: This will ensure a family member or trusted friend is able to access your funds to cover medical or funeral costs, if needed.
  • Assign a Health Care Proxy: Also known as a health care agent or durable power of attorney for health care, this person may make important medical decisions on your behalf if you are unable to make them yourself.
  • Discuss Advance Health Care Directives: These are specific instructions for your health care proxy detailing how you would like to be cared for.
  • Sign a HIPAA Waiver of Authorization: This is a legal document that allows your private health care information to be shared with family members, doctors and even attorneys and researchers. The purpose of this form is to ensure your health care proxy is able to discuss important medical matters with your doctor.

Additional Resources

There are many resources available for retirees looking to learn more, whether about a specific medical condition or how to sign up for financial assistance. Connect with advocacy centers and browse the resources below to learn more about how to best manage your health and related expenses in retirement.

Medical Resources for Retirees

Retired Veteran Resources

Advocacy Centers

Asbestos-Related Cancer Resources

Getting Additional Help

In addition to national resources, your city’s local senior centers are a great place to seek additional assistance. You may find that you have access to recreation centers or meal programs to help keep you active and healthy.

Many senior programs also include health and welfare education and counseling to make sure you stay on top of your well-being in retirement. Locate a senior center near you.

If you are unsure of your financial situation or want to seek professional advice, a financial advisor may be able to help. Financial advisors assist in setting retirement goals, make sure you stay on track, suggest ways to allocate your investments, provide explanations for tax-related concerns, and more.

Once you’ve made the necessary preparations and have a good understanding of how you’ll finance medical costs, you’ll be able to truly enjoy retirement — because the best retirement is one that is well-planned.