Keeping Insurance Costs Down Could Help You Retire Stress-Free

The benefits of keeping insurance costs down for retirement include lowering your monthly bills and making more room in your budget for hobbies, travel and other pleasure activities. As you approach retirement, you should start taking steps to lower your insurance costs and plan how to keep them low once you retire and no longer receive a steady paycheck from work.

Keep reading to learn more about the benefits of reducing the cost of insurance for retirement and how to reduce insurance premiums in retirement.

Can High Insurance Costs Impact Retirement?

Depending on your income, high insurance costs could delay your retirement by forcing you to dip into your savings to cover regular premium payments, potentially leaving you without the money you need to have set aside to retire comfortably.

Even if you are young and don’t anticipate retiring soon, spending more money on monthly premiums now may keep you from investing money in a 401(k) or some other retirement plan, which could cause problems when you eventually want to retire in the future.

Alternatively, if you have already retired, burdensome insurance premiums could leave you without the money you need to enjoy your retirement, as you may only have enough money left over to cover basic necessities. If your insurance bills are particularly high, you could even be forced to come out of retirement to make ends meet.

What Are the Benefits of Keeping Insurance Costs Down for Retirement?

The primary benefit of reducing insurance costs for retirees is that it grants them the financial freedom they need to take care of other necessary expenses and enjoy retirement however they and their family members see fit, according to Ryan McEachron, the CEO of ISU Insurance Services ARMAC Agency.

“Reducing insurance costs before and during retirement can free up funds for other expenses, like health care or leisure activities,” McEachron said in a message to SmartFinancial. “By minimizing these costs, retirees can enjoy a more comfortable lifestyle without financial stress. I’ve had clients who managed to cut their insurance expenses and were delighted to find they could afford trips they previously saw as out of reach.”

How To Lower Insurance Costs Before Retirement

See the below sections for tips on spending less on insurance and related expenses leading up to your retirement.

Look Into Discounts

One of the simplest ways to lower your insurance costs is to find out if you are eligible for any discounts or if there are any steps you could take to easily qualify for a discount. For example, you can often earn a discount by taking security measures that lower the odds that you will need to file a claim, such as installing an anti-theft device in your car or a home security system.

In addition, many insurance companies offer bundling discounts, meaning you can save money by purchasing multiple policies, such as homeowners insurance and auto insurance, from the same carrier. You should also check to see if you are eligible for an affinity discount based on the company you work for, the college you attended or your military service, if applicable.

Take Proactive Measures To Improve Your Health

Older plan members may have to pay up to three times more for health insurance than younger ones, so it’s important to be proactive about improving your health as you get older in order to reduce your health care costs.^[1] This may include basic steps like exercising regularly, eating healthier foods and getting enough sleep every night.

It may also be beneficial to take advantage of preventive services that can help you track the progression of chronic health problems and catch emergent illnesses early so you can treat them before they become serious.

You should note that many preventive care benefits are covered by health insurance without cost sharing regardless of whether you’ve hit your annual deductible, which means these particular medical services are always free if you have a Marketplace health plan and receive the services from an in-network medical provider.^[2]

Cover Health Care Costs With a Tax-Advantaged Savings Account

Another way to lower health care costs is to use a health savings account (HSA), which allows you to set aside money on a tax-free basis so you can later spend it on qualified medical expenses. This enables you to purchase a Marketplace high-deductible health plan (HDHP) with low premiums while using funds from the HSA to cover what would otherwise be high out-of-pocket costs. If you are insured through your employer, you may be eligible for a similar type of account known as a flexible spending account (FSA).

There is generally a limit on the amount of money you can deposit into an HSA or FSA. For example, you can only deposit up to $4,300 per year into an individual HSA and $8,550 per year into a family HSA in 2025. That said, you can make an additional contribution of $1,000 per year to your HSA if you are at least 55 years old.^[3]

Buy Life Insurance Early

Age and health status are two of the most important factors in determining life insurance premiums, so you may be able to set yourself up for a successful retirement by purchasing life insurance while you are young and healthy. Keep in mind that, for many policies, your premiums will stay the same throughout the entire time the policy is active, meaning you could secure cheap coverage that lasts for your whole life by shopping for life insurance early.

Some other reasons to consider buying coverage at a young age include giving permanent life insurance policies more time to accrue cash value that you may be able to withdraw later in life and minimizing the risk that you will be denied life insurance coverage altogether due to poor health.

How To Lower Insurance Costs During Retirement

In the next sections, you’ll learn how to keep insurance costs down for retirement after you have already retired.

Switch to Medicare

Switching from private health insurance to Original Medicare or a Medicare Advantage plan when you turn 65 can generally help you save money since most people receive Medicare Part A for free as long as they or their spouse paid taxes into Medicare for at least 10 years. Meanwhile, Part B premiums may rise with inflation from year to year, but you won’t have to worry about paying more for Medicare strictly because of your age. In 2024, most people pay $174.70 per month for Medicare Part B.^[4]

However, if you enroll in Medicare Part B late, your premiums will be 10% higher for every year you were eligible but neglected to sign up. For example, someone who became eligible for Medicare at age 65 but didn’t join until age 70 has to pay $262.05 per month for Part B in 2024, and this 50% rate hike will persist for as long as they stay on Medicare.^[4]

Similarly, there is a 1% penalty for each month you delay signing up for Medicare Part D prescription coverage after becoming eligible for it.^[4] As a result, it is often more cost-effective to switch to Medicare as soon as you turn 65 than to stay on a Marketplace or group health insurance plan.

Raise Your Deductibles

If you have a sizable amount of money saved up and want to lower your monthly premium payments, one option is to raise the deductibles on your homeowners and car insurance policies. You’ll have to pay more up front in the event of a loss that requires you to file a claim, but the lower premiums could result in long-term retirement savings if you don’t expect to file claims often.

However, when it comes to medical coverage, you should consider the extent of your retirement health care needs before switching to an HDHP. If you take many prescription medications or go to the doctor several times each year, it’s probably better to stick with a plan that charges more on a monthly basis in exchange for allowing you to pay less each time you receive medical care.

Adjust Insurance Policies To Match Lifestyle Changes

As you make various lifestyle changes in retirement, consider how these changes could translate into lower insurance premiums. For example, if you rarely drive since you don’t have to commute to work on a daily basis anymore, you may be able to save money by switching to a pay-per-mile car insurance policy.

Similarly, if you move to a gated retirement community with neighborhood-wide security systems, ask your home insurance company if you can get lower rates since there is likely a lower chance that you will need to file a claim related to theft. In many cases, retirees over the age of 55 are eligible for homeowners insurance discounts of up to 10%.^[5]

Shop Around

Even if you’ve been with the same insurance company for many years, it may be beneficial to compare quotes from three to five other companies. Since insurers have different methodologies for calculating rates, it’s possible that a different carrier will offer you a better deal than your current carrier on the type of coverage you need.

The easiest way to compare prices for multiple types of insurance is to use SmartFinancial. Our online platform allows you to quickly connect with agents who can help you find the best policy for your circumstances, and the insurance shopping experience won’t cost you a thing. Click here to select the type of insurance you need and start shopping around for free.

What Are Some Hidden Costs Retirees Should Watch For With Insurance?

Potentially unexpected insurance-related expenses you should keep an eye out for include out-of-pocket health care costs and expenses related to health insurance exclusions and excessive or insufficient coverage. Even when your insurer starts covering care, you’ll generally still be on the hook for some of your medical costs until you reach your out-of-pocket maximum, so don’t expect your personal health care spending to stop just because you’ve hit your deductible.

You should also make sure you understand what is and isn’t covered by your health plan so you don’t end up paying full price for a service you were expecting your insurance company to take care of. For example, hearing aids and dentures aren’t covered by Original Medicare and likely won’t be covered by a private health plan unless you purchase additional coverage.^[6][7]

Finally, you may encounter unnecessary expenses if you have too much or too little insurance. You may be overinsured if you have coverage types you don’t need, higher coverage limits than you need, overlapping policies or premiums that are oppressively high. Meanwhile, you may be underinsured if you don’t have the coverage types you are required by law to carry, you don’t have the right lineup of policies to cover the risks you face in your day-to-day life or your coverage limits are too low.