Healthcare Costs in Retirement: Planning Beyond Medicare

When most people think about retirement expenses, healthcare often gets overlooked — or dramatically underestimated. Many assume that once they enroll in Medicare at age 65, most of their medical costs are covered.

Unfortunately, that’s not the full story.

Healthcare can be one of the largest — and fastest-growing — expenses you'll face in retirement. Smart retirees don’t just hope it works out. They plan for it.

Here’s what you need to know — and how to get ahead of it.

The True Cost of Healthcare in Retirement

According to ananalysis by Fidelity (https://newsroom.fidelity.com/pressreleases/fidelity-investments--releases-2024-retiree-health-care-cost-estimate-as-americans-seek-clarity-arou/s/7322cc17-0b90-46c4-ba49-38d6e91c3961), a healthy 65-year-old couple retiring today can expect to spend an average of $315,000 on healthcare expenses throughout retirement.

Breakdown includes:

• Medicare premiums (Parts B, D, and supplemental plans)

• Dental, vision, and hearing care (not covered by standard Medicare)

• Co-pays, deductibles, and prescriptions

• Long-term care costs (which Medicare generally does not cover)

And remember — healthcare inflation tends to rise faster than general inflation.

If you’re planning for a 20–30 year retirement, factoring in rising healthcare costs is not optional — it’s essential.

What Medicare Covers — and What It Doesn’t

Medicare is a valuable resource, but it’s far from comprehensive.

Medicare Parts A & B cover:

• Hospital stays

• Doctor visits

• Basic lab tests

• Some preventive services

But there are gaps. Medicare doesn’t cover:

• Long-term care (like nursing homes or in-home custodial care)

• Most dental, vision, and hearing services

• Prescription drugs (without a separate Part D plan)

• Overseas medical care

That’s why many retirees purchase:

• Medicare Supplement Insurance (Medigap)

• Medicare Advantage plans (Part C)

• Standalone prescription drug plans (Part D)

Each option has costs, pros, and cons — and needs to be planned for in your retirement budget.

Planning Strategies for Managing Healthcare Costs

1. Build Healthcare Expenses into Your Retirement Income Plan

Don't treat medical costs as a surprise. Include realistic estimates for:

• Premiums

• Deductibles

• Out-of-pocket costs

• Potential long-term care needs

Tip: It's often smart to separately bucket future healthcare expenses from general living expenses when doing retirement projections.

2. Consider a Health Savings Account (HSA)

If you have access to an HSA while still working, it’s one of the most powerful tax-advantaged savings vehicles available.

HSAs offer:

• Tax-deductible contributions

• Tax-free growth

• Tax-free withdrawals for qualified medical expenses

You can even reimburse yourself in retirement for past medical expenses — creating a flexible, tax-free income source later.

Important: To contribute to an HSA, you must be enrolled in a high-deductible health plan (HDHP) and not yet enrolled in Medicare.

3. Explore Long-Term Care Planning

Long-term care is a major wild card.

Options to consider:

• Traditional long-term care insurance

• Hybrid life/long-term care policies

• Self-insuring (setting aside dedicated assets)

Fact: According to the Cost of Care Survey (https://www.carescout.com/cost-of-care), the national median cost of a private room in a nursing home now exceeds $127,000 per year — and many families underestimate the odds of needing care.

Planning ahead can protect your retirement assets and reduce stress on your family.

4. Plan for Healthcare Inflation

Assume healthcare costs will grow faster than general inflation.

Many financial plans model general inflation at 2–3%, but healthcare expenses may rise by 5–6% annually.

Make sure your retirement projections account for this higher inflation factor — or you may face shortfalls later in life.

Frequently Asked Questions

Q: Can I keep my employer’s health insurance after retirement? A: Some companies offer retiree health benefits, but it's becoming rare. Always check — and don't assume it’s guaranteed.

Q: Is Medicare enough by itself? A: Usually no. Without supplemental insurance, you could face unlimited out-of-pocket exposure. Medicare has deductibles, co-pays, and 20% coinsurance with no cap unless you have additional coverage.

Q: Should I delay retirement to keep my employer health coverage? A: In some cases, yes. Especially if you're retiring before 65 and need to bridge the gap to Medicare eligibility.

Final Thoughts: Healthcare Planning Is Retirement Planning

Retirement isn’t just about having enough money to travel or pursue hobbies. It’s about making sure that rising healthcare costs don't erode your financial security.

At Kingdom Guard Financial Group, we help our clients create retirement plans that anticipate healthcare realities — not just hope for the best. With proactive strategies, tax-efficient savings, and risk management, you can enjoy your retirement with confidence.

If you're ready to build a retirement income plan that fully accounts for healthcare needs, let's talk.

Important Disclosure: This material is intended for informational purposes only and should not be construed as personalized investment, financial, tax, or legal advice. Consult your financial advisor or tax professional regarding your unique situation.

Not affiliated with or endorsed by the Social Security Administration, the Centers for Medicare & Medicaid Services, or any governmental agency.