The Retirement Expense You May Be Missing

People often underestimate some expenses when planning for their retirement, if they consider them at all.

So, when the topic of underrecognized retirement expenses came up after a webinar earlier this year, my response was almost reflexive. “It’s dental for sure,” I confidently announced to my colleagues.

Because the fact is, in my conversations with older adults about their in-retirement finances, they’ve repeatedly mentioned the cost of dental care. The reasons are straightforward: Our teeth typically get worse as we age, and yet dental care isn’t covered by Medicare. (Medicare covers emergency dental procedures for people who are hospitalized, but that’s obviously very limited coverage.)

The fact that dental care falls outside of the Medicare system can mean high out-of-pocket costs at inopportune times for older adults. It can also mean that some seniors put off dental care, resulting in even more serious and often painful issues. In a 2022 National Health Interview Survey, 11.2% of respondents over 65 said they had put off dental care due to cost—a far higher percentage than those who had put off mental healthcare, medical care, or prescription drugs.

There are three main avenues to covering dental costs during retirement: purchasing dental insurance, obtaining dental coverage through a Medicare Advantage program that covers dental care, and paying dental expenses out of pocket. Here’s what to consider with each of these options.

Buying Stand-Alone Dental Insurance

While dental care isn’t covered by Medicare or Medigap, older adults can purchase stand-alone dental insurance. Monthly premiums typically range from $25 to $50. Coverage varies widely, however, with plans typically capping the dollar amounts they’ll cover in a single year. Annual caps range from $1,000 to $2,500, providing scant protection against extensive and costly procedures. Additionally, many plans impose waiting periods that prevent you from receiving major procedures such as crowns or root canals within the first six to 12 months of coverage. That means if you’re inclined to purchase dental insurance, it’s wise to do so before you have a problem.

Moreover, and important to people who have been seeing the same dentist for a long time, dental insurance will often entail using specific providers. Dental health management organizations, like health maintenance organizations for healthcare, are the most restrictive, though they’re also the most economical. Dental preferred provider organizations offer more choice, but at a higher cost.

The bottom line: Taken together, the insurance premiums plus the annual coverage limits don’t point to a great economic case for carrying dental insurance into retirement: Annual premiums often come close to what you’d pay out of pocket for basic preventive care in a given year, and the annual dollar caps on insurance limit your protection against very costly procedures. Limitations on providers further point to self-funding dental coverage for people who can afford to do so. However, one countervailing argument is that people without dental insurance are more likely to go without dental care than those who have coverage, according to data from the Medical Expenditure Panel Survey. If knowing that you have a “sunk cost” encourages you to stay on top of cleanings and other preventive care, paying for insurance could be worth it.

Medicare Advantage Dental Care

Many Medicare Advantage plans include dental care, along with vision care and hearing aids. Medicare Advantage is the managed-care, private-insurance version of Medicare; enrollees have to choose from a list of providers, and that includes dentists. Thus, obtaining dental coverage through Medicare Advantage won’t be a great option for anyone who wants to stick with an established provider who’s not on the list.

From a big-picture standpoint, it would be a mistake to let dental coverage—or any other ancillary service that a Medicare Advantage plan might offer—drive the decision about whether to opt for Medicare Advantage or traditional Medicare with a supplemental plan. True, Medicare Advantage plans can be more affordable, but their out-of-pocket limits can be high. Moreover, provider networks can be limiting, and plans may require referrals to see specialists, which can slow down care. Additionally, people switching out of Medicare Advantage and into traditional Medicare will need to undergo medical underwriting for Medigap coverage.

The bottom line: All of these considerations suggest that dental coverage should be a secondary factor when determining healthcare coverage in retirement. If Medicare Advantage makes sense for your situation for primary healthcare and financial reasons, consider dental coverage an extra perk.

Paying Out of Pocket for Dental Care

If you decide to cover dental care by using your own assets, it can help to do a little fact-finding to estimate how much to budget for the expense. Looking back on your dental costs over the past five years, before factoring in insurance, is a good starting point; you can at least budget for routine preventive care. In addition, your dentist should be able to share a price list for various common procedures.

If you have an established relationship with your dentist, you could also consult with them to get ahead of any procedures you may need in the near term. You can then make a judgment about whether to get them done while you’re still working and covered by insurance or wait until retirement. At a minimum, you’ll be able to get your arms around what these outlays may look like.

While it’s helpful to come up with a rough estimate of lifetime dental expenses, it doesn’t make sense to create a separate “bucket” for those expenditures. That’s because, unlike long-term care, which tends to be a point-in-time expense (usually toward the end of life), your spending on dental will likely be spread out throughout your retirement years. In other words, factor dental costs into your ongoing in-retirement budget, but don’t go to the trouble of hiving off a separate account for them because you don’t know when you’ll need the money or how much you’ll need.

Health savings accounts are ideal assets to earmark for dental care in retirement. Most dental procedures, save for cosmetic ones, can be covered by tax-free HSA withdrawals. Moreover, it’s important to use HSA assets during your own lifetime (and/or that of your spouse), because the tax benefits effectively cease after your death; withdrawals by nonspouse beneficiaries are taxed as ordinary income.

Alternatively, if your high dental expenses happen to coincide with other major healthcare outlays in a given year, you may be able to deduct those expenses on your tax return. (Dental expenses can be bundled together with other healthcare outlays from the standpoint of deductions.) However, you can only deduct medical expenses in excess of 7.5% of your adjusted gross income. In addition, the higher standard deduction amounts, plus the new senior deduction, mean that many older adults will be better off claiming the standard deduction than they will itemizing.

The bottom line: For people with adequate financial assets, forgoing insurance and self-funding dental coverage can make sense. This approach obviously gives you more control over where you receive dental care: If you like your current dentist, you can stick with them.

Additionally, once you factor in insurance premiums and annual caps, you won’t necessarily be that much ahead with insurance versus paying out of pocket. Your provider may also offer a discount if you’re paying with cash versus going through insurance, as the former will reduce their administrative load.