Preserving Health and Wealth: How to Plan for Healthcare Costs in Retirement

Admin • January 19, 2024

Retirement is a time meant to savor your successes from years of hard work, when you can focus on filling your bucket with meaningful experiences – travel, hobbies, volunteering, and spending time with loved ones. You want to live your retirement life to the fullest, and having a financial plan in place can allow you to enjoy financial security well into your golden years. 

Whether you’re nearing retirement or decades away, a financial plan can act as a roadmap to help you prepare for the expenses you’ll have in retirement. One of the biggest expenses retirees may face is medical expenses. 

According to an annual study on the average cost of healthcare in retirement, a 65-year-old who retired in 2023 can expect to spend an average of $157,500 on health and medical expenses throughout retirement. A couple can expect to spend $315,000 on healthcare costs throughout their retirement.

This cost becomes even greater for younger generations who aren’t retired yet – with rising healthcare costs and the impact of inflation , a couple in their mid-forties now may see their lifetime retirement healthcare costs grow by over $250,000, for a projected total of more than $1.7 million. That couple would likely spend more on their retirement healthcare costs than the total Social Security benefits they would receive. 

While these future healthcare costs may seem daunting, they’ll vary based on when and where you retire, how healthy you are, and how long you’ll live. Also, these costs won’t be paid as a lump sum all at once, so you can plan for them as an ongoing expense in your retirement budget. 

With strategic financial planning, you can be better prepared for the uncertainties of your future healthcare expenses and help ensure a more secure and resilient foundation in your retirement years.

Estimating the Average Cost of Healthcare in Retirement

As part of your planning, estimate your average healthcare costs when you’re retired so that you can have a general idea of what you can expect to spend. 

Analyze your current healthcare expenses, including your insurance premiums, routine medical care, ongoing care for health conditions, prescription medications, and out-of-pocket costs. Seeing how much you currently spend on healthcare can provide a baseline for understanding your future needs.

Make sure to account for inflation and continued rising healthcare costs so that you have a more realistic projection of your future expenses. Looking ahead allows you to adjust your financial plan so that you can meet these potential increases.

Strategies to Manage Healthcare Costs in Retirement

How can you prepare for healthcare costs in retirement? In addition to using your retirement savings to pay for medical expenses, there are a few things you can do both before and after retirement to manage these costs.

Live a Healthy Lifestyle

Living a healthy lifestyle isn’t limited to just your retirement years, as prioritizing your health and well-being throughout your lifetime brings immeasurable benefits to you and your loved ones. Embracing a healthy lifestyle also contributes to your long-term financial well-being: being proactive about preventative care and committing to wellness can reduce the frequency of medical care and associated expenses.

Health Savings Accounts (HSAs)

While you’re still in your working years, consider contributing to a Health Savings Account (HSA) if your employer offers a HSA-eligible health plan. HSAs offer a convenient, tax-efficient way to save for healthcare costs in retirement.

You contribute to your HSA with pre-tax dollars through payroll deductions, and those contributions grow tax-free in your account. You can withdraw money, also tax-free, when used to pay for qualified medical expenses, both while working and in retirement. 

You can also use HSA money for non-medical expenses after the age of 65 without any penalties (be aware, though, that you’ll be responsible for paying taxes on your non-qualified withdrawals).

HSAs are a valuable tool in planning for your healthcare costs in retirement, providing a dedicated vehicle to save for healthcare expenses.

Medicare and Medigap Insurance

The Medicare tax is a payroll tax that’s used to support healthcare costs for retirees and is paid by both employees and employers in the US. The current tax rate for Medicare is 1.45% each for the employee and employer (2.9% total). If you earn over $200,000 annually, you’ll be subject to an additional Medicare tax of 0.9%.

You’re eligible for Medicare at age 65, so consider familiarizing yourself and reviewing the different Medicare options before you become a beneficiary. Medicare has several elements: Part A, Part B, and Part D, as well as Medicare Advantage and Medigap.

  • Medicare Part A covers inpatient care in hospitals and skilled nursing facilities after you meet a deductible (the deductible amount for 2024 is $1,632). You’ll be responsible for daily coinsurance after a certain length of time as an inpatient.
  • Medicare Part B is optional coverage for services not covered by Part A, including physicians’ services, outpatient hospital services, and durable medical equipment. Part B requires a monthly premium, which is determined by your income, as well as deductibles and coinsurance you’ll be responsible for.
  • Medicare Part D covers prescription drugs and also requires a monthly premium determined by income.
  • Medicare Advantage plans are managed care plans that cover services under Part A and Part B and may cover additional services, including prescription drug coverage.
  • Medigap policies are supplemental policies offered by private insurance companies to cover the “gaps” in Medicare. Medigap policies provide additional coverage for deductibles, coinsurance, and other expenses. 

Long-Term Care Insurance

Medicare doesn’t cover long-term care, so you can consider purchasing long-term care insurance. Long-term care insurance policies offer protection against the significant financial impact of extended care needs, as prolonged medical care can be particularly costly. 

Having long-term care insurance (or a long-term care insurance rider added to your life insurance policy) can not only help you plan for healthcare costs, but help preserve your retirement savings as well.   

Planning for the Impact of Healthcare Costs

Healthcare costs can have a significant impact on your financial security during retirement. It’s important to account for these costs in your financial and retirement planning, so that you can align your financial goals with your future healthcare costs.

At Five Pine Wealth Management , we’ll work with you to develop a comprehensive financial plan and retirement strategy to address your present and future financial needs, including health and medical care. 

As fiduciary financial advisors , we are legally bound to act in your best interest as we help you navigate the complexities of financial and retirement planning. We’ll work together with you to create a holistic, comprehensive plan that meets your unique needs and objectives. 

To see how we can help you grow and preserve your wealth well into retirement, email us or give us a call at: 877.333.1015.

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How to Build a Retirement Plan That Works No Matter What the Economy Does

August 14, 2025
We’re all feeling it these days: the underlying feeling of uncertainty about what lies ahead. Each day, we see headlines about inflation, Social Security’s future, or market swings. Unsurprisingly, Gallup tells us that the top three American fears have to do with money: the economy, availability/affordability of healthcare, and inflation. If you’re in your 50s and 60s, these concerns probably hit even closer to home. You’re not just thinking about the economy in general terms. You’re wondering how it will affect your specific retirement plans. Your mind likely turns to: Increasing healthcare costs – can you absorb unexpected costs on a fixed income? Inflation and market volatility – will the value of the dollar diminish your retirement savings? Social Security uncertainty – will it exist when you retire? Having enough saved – will your retirement budget hold up when the time comes? About 1 in 4 Americans over 50 are delaying retirement , and it’s not hard to understand why. 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Understand Your Medicare Options If you're 65 or older: Enroll in Medicare during your Initial Enrollment Period (IEP), which begins 3 months before your 65th birthday and extends 3 months after Consider supplemental coverage options: Medigap (if you choose Original Medicare Parts A and B) Medicare Advantage (Part C) as an alternative to Original Medicare Prescription Drug Coverage (Part D), if not included in your plan If you’re under 65 and retiring, consider: COBRA coverage from your employer allows you to keep your current plan for up to 18 months, but you'll pay the full premium plus administrative fees (typically $400-$700 per person monthly) Your spouse's employer plan (if available and you're eligible) An Affordable Care Act (ACA) marketplace plan Prepare for the end of employer-sponsored insurance coverage about a year in advance to avoid lapses in coverage. 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If you’ve built significant home equity, downsizing or moving to a more affordable city may be a great option, as you’ll benefit from liquidity and reduced costs. Rely on A Trusted Fiduciary Financial Planner If you’re feeling anxious about the future, know this: you’re not stuck doing it on your own. With the help of a fiduciary financial planner, you can not only see if your plan holds up against inflation and economic uncertainties, but they will:  Prioritize tax-efficient retirement withdrawal strategies Strategize Required Minimum Distributions (RMDs) Create a sustainable withdrawal strategy The best thing you can do for a healthy retirement is to leverage the experts. At Five Pine Wealth Management , we create comprehensive financial plans that align with your financial goals and personal values. If you'd like to discuss how these strategies might apply to your specific situation, we're here to help. Email us at info@fivepinewealth.com or call 877.333.1015 to schedule a conversation about your retirement planning needs.

40 and Catching Up: Why This Decade Could Be Your Best for Building Wealth

July 18, 2025
Your 40s arrive with a unique mix of clarity and urgency. You've likely figured out what you want from life, but suddenly retirement no longer feels like a distant concept. If you're looking at your financial situation and feeling behind, you're not alone. Many people in their 40s experience this same wake-up call. The good news is that this decade offers some of the most powerful opportunities to accelerate your wealth-building journey. Think of your 40s as your financial prime time. You're earning more than you ever have, you understand money better than in your 20s and 30s, and you still have 20-25 years to let compound growth work its magic. Instead of dwelling on what you should have done differently, let's focus on what you can do right now to make this decade count. The Reality Check: Where You Stand vs. Where You Want to Be Before exploring strategies, let's acknowledge the elephant in the room. Many financial experts recommend saving three times your annual salary by age 40. 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The Flexibility Buffer : Your 40s are a great time to build financial flexibility. This means having investments outside of retirement accounts that you can access without penalties, creating multiple income streams, and maintaining career skills that keep you marketable. Insurance: Life and disability insurance coverage should reflect your current income and family needs. Estate Planning : A basic will, power of attorney, and healthcare directive should be in place. Making Your Peak Earning Years Count Your 40s often represent your peak earning years, and how you manage this increased income will significantly impact your financial future. The temptation to inflate your lifestyle with every raise is real, but this decade calls for more strategic thinking. Consider implementing a "pay yourself first" approach where you immediately redirect any income increases to savings and investments. 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Focus on tax-efficient investments, such as index funds, and consider holding dividend-paying stocks or REITs for their income potential. Real estate can be particularly powerful in your 40s. Whether it's paying off your primary residence early, investing in rental properties, or exploring REITs, real estate adds diversification and potential inflation protection to your portfolio. Don’t Forget the “You” Factor We’d be remiss not to mention this: life in your 40s is busy. You might be managing aging parents, teenagers, or a toddler (or all three). You may be helping your partner through a career change or navigating one yourself. It’s a lot. Which is precisely why intentional financial planning matters now more than ever. You don’t need to do it perfectly. You just need a plan that’s rooted in your real life — your values, your vision, and your goals. A good financial advisor can help you prioritize, simplify, and clarify the next best steps, even if you feel like you’ve fallen behind. Ready to Create Your Personal Financial Strategy? Feeling overwhelmed by all the options and strategies available? You don't have to navigate this journey alone. At Five Pine Wealth Management , we specialize in helping individuals and families in their 40s and beyond create comprehensive financial plans that align with their goals and circumstances. Whether you're looking to maximize your retirement savings, explore catch-up strategies, or build a diversified investment portfolio, our team can help you develop a personalized approach tailored to your situation. We work with clients at various stages of their financial journey, from those just getting serious about retirement planning to those with substantial assets seeking to optimize their strategies. Don't let another year pass wondering if you're on the right track. Schedule a conversation with our team to discuss your financial goals and explore how we can help you make the most of your financial prime time.