Man who has balanced how Social Security and Medicare affect his retirement income and expenses.

Balancing income and expenses with Social Security and Medicare

Creating a plan for taking Social Security and signing up for Medicare is a cornerstone of retirement planning. Yet these 2 programs—and their future solvency—remain among the biggest worries for people in or nearing retirement.

In fact, 60% of retirees say they are highly concerned about potentially reduced Medicare benefits in the future. Sixty-one percent say they are highly concerned about the same scenario for Social Security according to the LIMRA Retirement Income Reference Book 2018.

How much Social Security might cover may depend on when you select your benefits. Medicare costs can vary depending on your coverage elections. Everyone’s situation is different, and there’s no one right way to elect either.

To get you started thinking about these benefits, here’s a look at how the 2 programs may work together to impact your retirement income and expenses.

Social Security benefits

Social Security may provide a large portion of the income you'll need in retirement.

Graphic showing that for the first time in U.S. history older adults are projected to outnumber children by 2030.
Pie chart showing that Social Security will only replace a portion of your income in retirement.
Graphic showing that when you elect your Social Security benefits can make a big difference.

Your income depends on your benefits.

  • Early vs. late election
  • Continuing to work
  • Spousal benefits

Medicare benefits

Medicare will pay a portion or your healthcare expenses in retirement but not all.

Healthcare is expensive. A healthy 65-year-old couple can expect to spend $363,946 (in today’s dollars) on healthcare premiums throughout retirement.1
Chart showing that health care costs are expected to increase by 5.8% from from 2014 to 2024.
Chart showing that health care represents a greater share of your income as you age.
Pie chart showing that Medicare will only cover half of your healthcare costs.

Your expenses depend on your elections, such as:

  • Part A, B
  • Medicare Advantage
  • Medigap
  • Medicare Part D

Ready to get started?

  • Looking for estimates? Start visualizing retirement with your own info by visiting our planning tools and calculators.
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  • Interested in starting an individual retirement account (IRA) or consolidating other accounts into your existing one? Call 800-247-8000, ext. 2503 between 7 a.m. and 9 p.m. CT. Not familiar with IRAs? Here’s a refresher.
  • Got a financial professional? They can help you figure out your next steps. If you’d like to meet with one face-to-face, we’ll help you find one.

1 Source: EBRI, December 2017.

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

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