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.

Join Our Newsletter


Plan smarter with our monthly financial tips + insights

What Happens to Your Tax Bracket When Your Spouse Passes Away?

October 27, 2026
Key Takeaways RMDs can leave a surviving spouse with substantial taxable income even after they move from joint to single tax brackets. The bridge years between retirement and RMDs are often the best window for couples filing jointly to make Roth conversions. Roth conversions can also spare heirs from inherited IRA taxes that come with a traditional IRA. If you asked married couples what they want their retirement savings to do, most would agree something like this is a top priority: if anything happens to one of us, the other will be okay, and so will our kids. Many of these couples save consistently and build healthy IRAs. They stay on top of beneficiary designations and estate documents, too. They’re doing everything right and feel confident the plan will hold. Maybe that’s where you are, too. What plans sometimes neglect, though, is the tax return. Once the surviving spouse moves from joint to single filing, the same IRA you both intended to provide security can push them into a higher tax bracket through required minimum distributions. Higher Medicare premiums may follow. That’s why you shouldn't wait to plan for the surviving spouse’s tax picture until one spouse is gone. Couples have more options while they’re both here to make decisions together, particularly in the years between retirement and required minimum distributions. Related Reading: How to Prepare Financially for the Death of a Spouse How Your Tax Return Changes After the Loss of a Spouse In the year a spouse passes, the survivor can generally still file a joint return. That keeps the wider joint bracket and the larger standard deduction intact for one more tax year. After that, many surviving spouses eventually file as single. A status called “qualifying surviving spouse” extends those joint tax rates for two more years, but only when a dependent child still lives in the home. (For most couples approaching or in retirement, that exception won’t apply.) The 2026 federal income tax brackets, updated for OBBB amendments, compare like this: 2026 Federal Income Tax Rates 

How Much Can You Spend on Travel and Giving in Retirement?

September 17, 2026
Key Takeaways Having substantial wealth doesn’t automatically translate into a clear strategy for spending on travel, family, and philanthropy. A tax-aware withdrawal strategy determines how much you can direct toward discretionary spending and gifts each year without disrupting your plan. You can remove the guesswork by giving travel, family gifts, and charitable giving their own funding strategy through tools like donor-advised funds, QCDs, and structured gifting. A written, stress-tested income and withdrawal plan is how you get numbers you can act on with confidence. They call it your “golden years” for a reason. It’s the long stretch you’ve dreamt of for years: leisurely trips with your spouse, helping your kids with a down payment, and finally writing that big check for a cause you’re passionate about. You built significant wealth and have the resources and the desire to do all three. But even with a substantial portfolio, many high-net-worth retirees hesitate before spending freely — even on the things that matter most to them. Even with substantial assets, they find themselves asking, “How much can I spend in retirement? That hesitation usually has to do with the absence of a coordinated strategy that spells out how much you can direct toward discretionary spending each year and how those decisions affect your tax obligations, estate plans, and financial flexibility. Shifting From Building Wealth to Directing It  For most of your career, your financial discipline revolved around growing your portfolio: maximizing contributions, managing risk, and watching the number climb. That habit served you well, but retirement introduces a shift in decision-making. Instead of allocating income toward growth, you’re directing that accumulated wealth toward your lifestyle, your family’s future, and the causes you care about. Once you retire, your measure of success changes from the size of your balance to whether your withdrawal strategy can fund your priorities and legacy goals without unnecessary tax drag or risk.