The Smart About Money website will be retiring on July 31, 2021. Learn more about this decision.


3: Analyze Your Decisions

Bridging the Gap

stethoscopeFor a majority of Americans, there are primarily two ways to fund health care costs in retirement.

To ensure your health needs are met without putting you (or your family) deep into debt, you will need to find ways to supplement what Medicare covers.


Medicare will not cover all of your expenses, so you may want to consider Medicare Supplemental Insurance (Medigap) to meet these additional costs. When purchasing Medigap, consider:

  • Purchasing when enrolling in Medicare Part B to avoid denial of coverage and avoid late enrollment fees.
  • There is no need to buy multiple plans – just one will do it for you.
  • Review and compare benefits before selecting a plan.
  • Compare Medigap plans against Medicare Advantage plans before making a choice.

Health Savings Account (HSA)

If you have a health savings account through your employer, contribute the maximum allowed each year. These pretax dollars can be used after you retire to pay for health-related expenses.


An annuity (bought through an insurer) provides a regular stream of income to offset medical costs or for any other purpose.

  • Deferred annuities give you the ability to take regular payments, usually after retirement. Some seniors use them to help pay for long-term care.
  • Immediate annuities begin paying out soon after you make an initial lump sum payment.

Department of Veterans Affairs (VA)

Veterans who qualify can get health care and prescription drugs through Veteran Affairs (VA). This benefit can be particularly significant regarding prescription drugs. However, treatment in a hospital or service outside of the VA system still requires Medicare or some other way to pay.

Long-term Care Insurance

Most long-term care policies pay a daily benefit for custodial care in various settings including:

  • Your home
  • Adult day service centers
  • Hospice care
  • Respite care
  • Assisted living facilities
  • Alzheimer's, dementia and memory impairment care facilities
  • Nursing homes

The actual cost of a long-term care policy is determined by your age at the time of purchase, the policy type, the coverage selected, your physical health and options such as an inflation rider (protects the value of a long-term care benefit against rising costs and inflation).

Note, you must meet benefit triggers (criteria established by the insurance carrier to determine eligibility) and elimination periods (time that must pass after a trigger occurs) to begin receiving benefits from a long-term care insurance policy. Similar to the deductible paid on an auto insurance policy, this equates to costs you will have to pay before the benefit begins.

Course Home