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Medicare Costs & Retirement

When considering planning for individual or family income needs during retirement, the cost of Medicare may not be top of mind. However, Medicare premiums can escalate dramatically-especially with higher incomes. Currently, it can be as much as 240% higher than the standard rate. The premiums are based on modified adjusted gross income (MAGI) from two years prior which is when many retirees reach their peak earning level. Regardless of a retiree’s earning level before retirement, expenses associated with Medicare should not be overlooked in planning for retirement income needs. Planning to have Medicare cover extended and long term care expenses in retirement is not a plan and will exacerbate income shortages if care is needed.

-Excerpt from "How Not to Tear Your Family Apart"

“I know Nicole shared it with her brother, Erik.

According to the Fidelity Retiree Health Care Cost

Estimate, an average retired couple age sixty-five in 2020

may need approximately $295,000 saved after taxes to

cover health-care expenses in retirement.14 For affluent

investors, that number can rise to $320,000 or more

depending on state taxes.15 The article warns that many

people assume Medicare will cover all health-care costs in

retirement, but apparently it doesn’t. The article says that

about 15 percent of the average retiree’s annual expenses

will be used for health care-related expenses. It’s a pretty

eye-opening article, Jodi.”16

“I had no idea.” Jodi leans in with a concerned look on

her face. “That’s a big chunk of money.”

“Exactly.” Jackson nods. “Can you imagine if our own

health deteriorates or if we simply have the good fortune,

like your parents, to live long enough to experience the

effects of aging and then cause this same concern for our


“Yeah,” Jodi agrees, “everyone hopes to live a long and

healthy life, but it looks like it’s going to take some additional

planning to stretch our nest egg.”

15 Ibid.

16 “How to plan for Rising Health Care Costs,” Fidelity Viewpoints,

Fidelity, May 6, 2021, With respect to federal taxation only.

Contributions, investment earnings, and distributions may or may not be

subject to state taxation. Please consult with your tax advisor regarding your

specific situation.

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