What kinds of costs are we talking about?
How much you’ll end up paying for coverage depends on which Medicare options you choose.
The basic form of government health insurance for seniors is known as "original" or "traditional" Medicare. Both names refer to Medicare Parts A and B.
Most people don’t pay any premiums for Part A, which covers hospital expenses and some home health services. But you will have to pay a monthly premium for Part B, which helps with the cost of doctor's appointments, exams, tests and a few other things.
Orman points out that a retiree with an income of less than $88,000 can expect to pay $148.50 a month for Part B this year. But that's not all: You also face deductibles, copays and coinsurance.
"According to a government report, the average out-of-pocket cost for people at least 65 years old is more than $6,800," Orman writes. "And that’s just in today’s world. If you aren’t retiring for 5, 10 or more years you know darn well those costs will be even higher."
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Another problem is that prescription drugs aren't covered under Parts A and B. Those also don't provide vision, hearing and dental coverage; President Joe Biden was hoping to remedy those omissions through a big budget bill now before Congress, but he has scaled back his Medicare expansion plan to hearing only.
Many people choose to pay for private add-ons or alternatives that are under the Medicare umbrella.
Part D plans, which cost an average $31.47 per month in 2021, cover prescription drugs, while supplemental plans known as Medigap can help with steep out-of-pocket costs.
Some consumers decide to ditch traditional Medicare entirely and opt for a privately run Medicare Advantage Plan, otherwise known as Part C.
Part C enrollees face out-of-pocket costs of up to $7,550 in 2021 — but that's better than traditional Medicare, which has no limit.
Start saving now
However close or far you are from retirement, Orman says it’s important to start saving immediately. Put away 10% of your salary — or, better yet, 15% — because you'll need plenty of money for Medicare.
"I am telling you this not to depress you or scare you, but rather to empower you to plan ahead for this cost," she said in a recent blog post. "That’s going to be so much better than finding out when you are retiring and enrolling in Medicare."
Orman is a big fan of investing through a Roth IRA, because your growth and qualified withdrawals are tax-free.
"You will be so happy in retirement if you have a pot of savings that you can use without owing any taxes," she says.
Most banks and brokerages — both traditional and online — handle Roth IRAs. You can even open one through an automated investing service, or robo-advisor.
You also might try a popular app that lets you put aside your "spare change" into an investment portfolio. A few dollars here and there can really add up over time. You can take your leftover change from everyday purchases and invest for your future.
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Read MoreStretch the dollars you have
No one ever said saving for a happy and healthy retirement would be easy. If squirreling away at least 10% of your income would be a struggle, Orman says you'll need to scale back on your "wants," as she calls them.
“What I see is that many households allow their spending to veer off to fulfilling wants more than needs,” Orman wrote for the AARP.
“Every time you are considering a new purchase — be it furniture, a cellphone, a computer or a remodeled bathroom — ask yourself if you are paying only what is necessary to meet that need. Is a less expensive option available?”
One way to put that advice into practice is by downloading a free browser extension that automatically scours the web for better deals and coupons every time you shop online.
Or, you might look for easy ways to trim your routine costs, like your car insurance bills. With many of us driving less during the COVID era, insurers have been handing out discounts. If yours won't give you a break, just shop around for a better policy.
As Orman says: "Live below your means but within your needs."
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