3 myths about Medicare costs in retirement

Understanding Medicare myths versus reality

Medicare is one of the most important factors in your retirement strategy, but it’s also often one of the most misunderstood. You’re not alone if you feel confused about what Medicare really costs and what it does (and doesn’t) cover.

With the right resources, you can build understanding and confidence for this critical part of your retirement strategy. Learn about three common Medicare myths that can lead to unexpected expenses and how a guaranteed income solution can help cover Medicare costs, keeping your retirement strategy on track.

Myth #1: Medicare is free

While Medicare Part A is free for most people, there are several other parts that require premiums, deductibles and out-of-pocket costs. Understanding these costs can help you plan better for future health care expenses that may not be covered by Medicare. Overall, ensuring you have retirement income set aside for these expenses is key.

Some of the costs associated with Medicare¹ include:

• Part A (hospital insurance): $1,600 hospital deductible per stay, which could be paid multiple times a year.
• Part B (medical insurance): Standard annual premium is $2,096 for 2024.
• Part D (drug coverage): Could require monthly premiums.

Even after paying premiums and deductibles, Medicare still doesn’t cover all health care costs:¹

• Part B: Requires 20% of coinsurance on health care services, after the deductible is paid.
• Part D: Covers only a portion of medication costs.

Myth #2: Medicare costs are the same for everyone and they don’t change

While some parts of Medicare have set costs, plans are highly personal. Total expenses will vary from person to person. For example, if you are considered a higher-income earner, you can expect to pay more for Parts B and D.¹

Factors that can affect your Medicare costs or heath care expenses include:

• The type of Medicare coverage and services you choose (including Medigap or Medicare Advantage plans)
• The type of services you end up needing (e.g., hospital stay, skilling nursing facility)
• Whether you’ll need separate drug coverage
• Your (and/or your spouse’s joint) income
• If you miss the enrollment period and accrue penalties

Like other cost-of-living expenses, Medicare expenses continue to rise. For instance:

• Medicare Part B premiums are expected to increase by 3.70% in 2025.²
• Each year, Part D prescription drug plans and Medicare Advantage plans can change premiums, deductibles and covered medications.

Across the board, health care costs are expected to rise significantly over the next 10 years. It’s likely that if you’re entering retirement today, you will see your Medicare costs increase over time, making it necessary to plan now for expected (and unexpected) health care expenses. 

Myth #3: Medicare covers long-term care

Up to 56% of middle-income baby boomers believe Medicare will pay for ongoing long-term care needs in the future.3 The truth is, Medicare doesn’t pay for any long-term care services.

The need for long-term care and the associated costs are impossible to predict. But if these services are needed, they can quickly deplete your retirement savings. A nursing home stay alone costs an average of over $90,000 annually.³

It’s estimated that 70% of people 65 and older will need long-term care at some point in their life.³ While it’s not enjoyable to think about this reality for yourself or a loved-one, it’s critical to consider this potential need as part of your retirement strategy.

Building your confidence through key retirement decisions

You likely protect your home, car and life with insurance. It may be time to consider protecting your retirement as well. Creating a source of guaranteed income is one option that can help cover Medicare costs and health care expenses not covered by Medicare while supporting your retirement income strategy. Talk with your financial professional to learn more about how annuities may fit into your retirement goals.

Explore these additional topics:

• What retirees need to know about Medicare
• Annuities can help meet your retirement needs
• Getting the most of your retirement benefits

1 https://www.medicare.gov/basics/costs/medicare-costs
2 https://www.cms.gov/newsroom/fact-sheets/2025-medicare-advantage-and-part-d-advance-notice-fact-sheet
3 https://www.centerforasecureretirement.com/posts/retirement-care-realities-for-middle-income-boomers

WEB.5872151.07.24