Growing Health Care Costs: Protecting Your Retirement
When you picture retirement, you probably imagine more time for family, travel, and enjoying life—not worrying about medical bills. Yet one of the biggest challenges retirees face today is the rising cost of health care. Without proper planning, those costs can eat into your hard-earned savings faster than expected.
Here are some big numbers of health care costs in retirement:
$172,500:
The estimated lifetime health care cost for the average 65-year-old retiree in 2025 (not including over-the-counter medications, most dental services and long-term care).
$17,780 per year:
The average amount that caregivers contribute financially to support their loved ones with cognitive decline.
70%:
The percentage of retirees who will need some form of long-term care in their lifetime.
Health care costs can rise quickly as we age, especially if medical needs become more complex. Many people underestimate how much they’ll spend. It’s easy to focus on planning for retirement activities, travel, hobbies, and lifestyle goals, but health care often becomes one of the largest expenses later in life.
Understanding Your Coverage Options
Here are some smart strategies to help you protect your savings and plan:
1. Get to Know Medicare and Supplemental Coverage
Medicare provides important basic coverage starting at age 65, but it doesn’t pay for everything. Out-of-pocket costs such as copayments, prescriptions, and long-term care can add up quickly.
To help fill these gaps, many retirees choose one of the following:
- Medicare Advantage (Part C) plans that combine hospital, medical, and drug coverage.
- Medigap policies, which supplement Original Medicare and help pay for deductibles and coinsurance.
The right combination depends on your health needs and budget. Our advisors can help you compare options so you’re confident you’re covered where it matters most.
2. Take Advantage of a Health Savings Account (HSA)
If you’re still working and have a high-deductible health plan, an HSA is one of the most powerful tools for your future. You can save money tax-free, let it grow tax-free, and withdraw it tax-free for qualified medical expenses—even in retirement.
Think of your HSA as a dedicated health care fund that travels with you into your retirement years.
3. Include Healthcare in Your Retirement Budget
Many people plan for everyday expenses like housing, food, and leisure, but forget to set aside a line item for medical costs. By including health care in your retirement budget—just as you would any other expense—you’ll have a clearer picture of what’s truly needed to maintain your lifestyle.
Our financial planning team can help you estimate those costs and build them into a long-term strategy that protects your overall savings plan.
4. Prepare for Long-Term Care Needs
Most retirees will need some form of long-term care at some point, whether it’s in-home assistance or an assisted-living facility. Unfortunately, Medicare doesn’t typically cover this type of custodial care.
That’s why it’s smart to explore long-term care insurance or create a dedicated fund to handle those potential costs.
5. Stay Proactive About Your Health
While financial planning is essential, maintaining your physical health is equally important. Staying active, eating well, and keeping up with preventive care can reduce healthcare costs and help you enjoy a higher quality of life throughout retirement.
The Bottom Line
Health care costs can be devastating for families, especially when they are ill-prepared financially. Addressing these costs before they become a reality can help preserve your savings and reduce financial stress later in life.
“By taking steps now to plan for future healthcare expenses, through smart insurance choices, savings strategies, and realistic budgeting, you can protect your retirement nest egg and focus on the things that matter most,” says Jack Lamont, Senior Vice President, Investments at David Lerner Associates, Inc.
Your health, your savings, and your peace of mind all deserve a plan that you can count on.
Material contained in this article is provided for information purposes only. It is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. These materials are provided for general information and educational purposes, based on publicly available information from sources believed to be reliable. We cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.