Why Healthcare Costs Are the Biggest Retirement Expense
When planning for retirement, many people focus on housing, travel, and lifestyle expenses. But the single largest—and often underestimated—expense is healthcare. Rising healthcare costs, combined with the effects of inflation, can significantly erode retirement savings.
For retirees and pre-retirees, preparing for these costs is not optional—it’s essential. A sound retirement income plan must account for the fact that healthcare inflation often outpaces general inflation.
How Inflation Impacts Healthcare in Retirement
Healthcare expenses rarely stay flat, and inflation accelerates their growth. According to historical data:
- Medical inflation has averaged 1–2% higher than overall U.S. inflation.
- Prescription drug prices, insurance premiums, and long-term care costs are particularly vulnerable to price increases.
- A couple retiring at age 65 today could need over $300,000 in after-tax dollars just to cover healthcare expenses in retirement.
Without a proactive plan, inflation can erode purchasing power and create financial stress during the years you should feel most secure.
Key Healthcare Costs Retirees Should Plan For
Not all healthcare expenses are the same. A fiduciary financial advisor will help you anticipate:
- Medicare premiums: Parts B and D often increase annually.
- Out-of-pocket costs: Deductibles, copays, and uncovered expenses.
- Prescription drugs: One of the fastest-rising healthcare costs.
- Long-term care: Assisted living, home healthcare, or nursing facilities can add hundreds of thousands in lifetime expenses.
- Supplemental insurance: Medigap or Medicare Advantage plans can help fill coverage gaps, but they add to monthly expenses.
Strategies to Protect Your Retirement Income from Healthcare Inflation
- Incorporate Healthcare Inflation into Your Retirement Projections
Don’t rely on average inflation rates. Plan using healthcare-specific inflation assumptions, which are historically higher.
- Build a Healthcare Savings Bucket
Designate a portion of your retirement assets specifically for medical costs. Options include:
- Health Savings Accounts (HSAs) if you’re still working and eligible.
- Tax-efficient investment accounts earmarked for healthcare.
- Leverage Insurance Options Wisely
Evaluate long-term care insurance or hybrid life/long-term care policies to offset future costs.
- Diversify Retirement Income Streams
Use a mix of investments, annuities, and guaranteed income sources to hedge against both market volatility and healthcare inflation.
- Work with a Fiduciary Advisor
A fiduciary advisor ensures your plan is built around your best interests—not products or commissions—helping you stress-test your retirement against rising healthcare costs.
The Bottom Line
Inflation and healthcare costs are two of the biggest threats to retirement security. By planning ahead and building an inflation-resilient income strategy, retirees can protect their wealth, preserve their lifestyle, and face the future with confidence.
Let’s Plan for Your Retirement Security
As a fiduciary financial advisor, I help clients design strategies to navigate rising healthcare expenses and inflation. If you’d like to ensure your retirement income plan is built to withstand these challenges, reach out today for a personalized consultation.
Global View Capital Management (GVCM) is an affiliate of Global View Capital Advisors (GVCA). GVCM is a SEC Registered Investment Advisory firm headquartered at N14W23833 Stone Ridge Drive, Suite 350, Waukesha, WI 53188-1126. 262.650.1030. Ryan Peca is an Investment Adviser Representative (“Adviser”) with GVCM. Additional information can be found at www.adviserinfo.sec.gov Global View Capital Insurance Services (GVCI) is an affiliate of Global View Capital Advisors (GVCA). GVCI services offered through Experior Financial Group, ASH Brokerage, and/or PKS Financial. GVCI is headquartered at N14W23833 Stone Ridge Drive, Suite 350, Waukesha, WI 53188-1126. 262-650-1030. Ryan Peca is an Insurance Agent of GVCI.
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