Healthcare is one of the most significant—and often underestimated—expenses in retirement. Even with Medicare coverage, out-of-pocket medical costs, insurance premiums, and long-term care expenses can meaningfully impact financial security in later life.

This blog provides a clear, educational overview of how healthcare expenses factor into retirement planning. It explores Medicare, Medigap, and long-term care coverage options without making recommendations, focusing instead on helping readers make informed, individualized decisions.

Why Healthcare Planning Matters in Retirement

According to recent estimates, a 65-year-old couple retiring today may need over $300,000 to cover health care expenses throughout retirement. These costs go beyond routine care and include insurance premiums, copayments, prescription drugs, and long-term care services.

Failing to plan for these expenses can result in:

• Eroding retirement savings faster than anticipated
• Increased financial stress during medical emergencies
• Limited options for care due to cost constraints

Understanding Medicare Basics

Medicare is a federal health insurance program for individuals age 65 and older, as well as certain younger people with disabilities. It has four primary parts:

• Part A (Hospital Insurance): Covers inpatient hospital stays, skilled nursing facility care, hospice, and some home health services. Typically free for those who paid Medicare taxes for at least 10 years.
• Part B (Medical Insurance): Covers doctor visits, outpatient care, preventive services, and some home health care. Requires a monthly premium, which may increase based on income.
• Part C (Medicare Advantage): An alternative to Original Medicare offered through private insurers. Often includes additional benefits like vision or dental.
• Part D (Prescription Drug Coverage): Helps cover the cost of medications and is offered through private plans approved by Medicare.

Medicare Costs and Premium Considerations

While Medicare Part A may be premium-free, other parts come with monthly costs:

• Part B Premiums: Standard premiums can change annually. Higher-income retirees may pay an Income-Related Monthly Adjustment Amount (IRMAA).
• Part D Premiums: Vary by plan and may also include IRMAA.
• Deductibles and Copayments: Medicare does not cover 100% of costs. Beneficiaries are responsible for deductibles, coinsurance, and other out-of-pocket expenses.

What is Medigap, and How Does It Help?

Medigap, or Medicare Supplement Insurance, is designed to cover “gaps” in Original Medicare such as deductibles, coinsurance, and copayments. Offered by private insurers, Medigap policies:

• Require enrollment in both Medicare Parts A and B
• Do not work with Medicare Advantage Plans
• Offer standardized coverage labeled Plan A through N (coverage details vary)

Medigap can offer predictability in out-of-pocket costs, but premiums can be significant and may rise with age.

The Long-Term Care Question

Medicare offers very limited long-term care coverage, generally restricted to short-term skilled nursing medical services care after a qualifying hospital stay. It does not cover custodial care (e.g., assistance with bathing, dressing, or eating).

Retirees must consider other options:

• Long-Term Care Insurance: Offers coverage for extended care, whether in-home, in assisted living, or nursing facilities. Policies vary widely in cost, coverage, and underwriting requirements.
• Hybrid Life/Long-Term Care Policies: Combine life insurance policies with a long-term care benefit.
• Self-Funding: Using personal savings or retirement assets to pay for care
• Medicaid: Available to individuals with limited income and assets, but access and coverage levels vary by state

Planning for these scenarios in advance can help preserve autonomy and reduce the emotional and financial burden on loved ones.

Policy Changes and Uncertainties

Healthcare policy continues to evolve, and retirees must stay informed of:

• Medicare cost adjustments are announced annually
• Legislative changes that could impact long-term care coverage or insurance regulations
• State-specific programs that may offer supplemental assistance or planning resources

Due to these variables, healthcare cost planning should be viewed as a dynamic process that requires regular updates and flexibility.

Integrating Healthcare into Your Retirement Strategy

Effective healthcare planning involves:

• Understanding what is and isn’t covered by Medicare
• Comparing Medigap vs. Medicare Advantage based on personal health needs
• Evaluating the need for long-term care insurance
• Budgeting for expected and unexpected medical costs

This planning should occur well before age 65, as some choices—like Medigap enrollment without medical underwriting—have time-sensitive windows.

Conclusion: Plan Proactively, Live Confidently

Healthcare expenses are an inevitable part of retirement, but with preparation and education regarding medical care, they don’t have to derail financial stability. Retirees can better manage one of their largest future expenses by understanding the components of Medicare, evaluating supplemental insurance, and addressing long-term care needs.

At TruNorth Advisors, we help clients build realistic retirement plans that account for both known and unknown healthcare costs.

To learn how medical expenses fit into your financial picture, schedule a consultation with TruNorth Advisors today. We’re here to support you with clarity and care.

Disclosures: This content is for informational purposes only and should not be considered medical, legal, or insurance advice. TruNorth Advisors is not affiliated with Medicare or any insurance provider. Consult a licensed professional before making any healthcare or insurance decisions.