Am I Prepared for Medical Expenses in Retirement?

By Brett Gottlieb

Medical expenses in retirement are one of the biggest and most frequently underestimated costs you’ll encounter after leaving the workforce.

According to Fidelity, a 65-year-old retiring today can expect to spend about $165,000 on healthcare over the course of retirement. For couples, that estimate climbs to $330,000. These are significant numbers, and they don’t even include long-term care.

The good news? The sooner you start planning, the more equipped you’ll be to handle these costs without putting your retirement savings at risk.

In this guide, we break down what to expect when it comes to medical expenses in retirement, the key factors driving those costs, and the practical steps you can take now to build a plan that helps preserve both your health and your financial future.

Understanding Medical Expenses in Retirement

Medicare premiums are the first thing you might have to budget for. You’ll pay monthly for:

• Part A: Covers hospital stays, skilled nursing care, and some home health services
• Part B: Covers doctor visits, outpatient care, preventive services, and lab work
• Part D: Helps with prescription drugs, but you’ll need to enroll through a private plan

Then there are out-of-pocket expenses like co-pays, deductibles, and the cost of medications that aren’t fully covered. The problem is that these expenses can add up fast, even if you have decent coverage. And because they’re ongoing, they can quietly reduce your retirement budget over time.

Funding Strategies for Medical Expenses in Retirement

Below are some approaches you need to consider for your healthcare costs.

Health Savings Accounts

If you’re still working and have a high-deductible health plan, getting a health savings account (HSA) might be a smart move. This is because it allows you to:

• Save tax-free: Contributions can lower your taxable income, growth typically isn’t taxed, and withdrawals for medical costs are penalty-free.
• Invest for growth: Unlike FSAs (flexible spending accounts), unused HSA funds often roll over yearly. You can let them grow for decades.
• Cover gaps: After age 65, you can use HSA money tax-free for Medicare premiums (except Part A), dental work, or even long-term care.

If you can afford to pay your current medical expenses out of pocket, letting your HSA grow untouched can be a great way to create a strong healthcare fund for retirement.

Planning for Long-Term Care

Long-term care can wipe out a retirement budget quickly if you’re not prepared.

Total long-term care costs can be significant and vary widely based on the type of care, the setting in which it’s provided, and your location. For instance, the national average for a private room in a nursing home is approximately $131,583 per year.

A few strategies recommended by financial advisors include:

• Long-term care insurance: Buying before age 60 lowers premiums, and policies often cover home aides, assisted living, or nursing homes.
• Hybrid life insurance: This combines a death benefit with long-term care coverage, meaning there’s no “use it or lose it” risk.
• Self-fund: Save aggressively or use home equity via a reverse mortgage.

Planning ahead, whether through insurance or savings, is one of the best approaches for helping to shield your retirement from the high cost of long-term care and medical expenses in retirement.

Roth IRAs and Tax-Savvy Withdrawals

Roth IRAs can be a great way to manage medical expenses in retirement, largely because qualified withdrawals don’t count toward your adjusted gross income. This means you can avoid triggering Medicare premium surcharges and may get the care you need without paying more than you have to.

Confidently Navigate Medical Expenses in Retirement With the Right Advisor

Rising medical expenses in retirement can take a serious toll on your savings if you’re not prepared. From routine healthcare to long-term care, the costs are only expected to increase. The good news? With proactive planning, you can manage these expenses without compromising your financial future.

At Comprehensive Advisor, we help you build a retirement strategy that accounts for health-related costs while preserving the wealth you’ve worked hard to grow. Let’s create a plan that supports both your well-being and your legacy. Email us at info@ComprehensiveAdvisor.com or call (760) 813-2125.

About Our Advisors

Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees, in business administration and economics, and is Life Insurance licensed in several states. He is passionate about guiding his clients on retirement income planning, helping each client pursue their specific retirement goals, and defending the assets his clients have worked so hard to achieve. Brett is a California native and currently resides in San Elijo Hills with his beautiful wife and three children.

Our team of qualified professionals have experience in the financial service industry, and our advisors hail from some of the largest independent broker/dealers and banking institutions in the country. They have dedicated their professional careers to creating personalized financial strategies for individuals and families who seek successful retirement planning and currently offer investment advisory services through AE Wealth Management, LLC. Our advisors take a common-sense approach to the planning process and work with clients to create a comprehensive retirement roadmap to help ensure their assets are preserved and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County and beyond. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.

Insurance products are offered through the insurance business C.A. Financial & Insurance Services. Comprehensive Advisor, LLC is an Investment Advisory practice that offers products and services through AE Wealth Management LLC (AEWM), a Registered Investment Advisor. AEWM does not offer insurance products. The insurance products offered by C.A. Financial & Insurance Services are not subject to investment Advisor requirements. CA Ins. Lic. #6000262.

Please remember that converting an employer plan account to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.

Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. 3167937 – 7/25