Planning for Healthcare Costs in Retirement: Beyond Medicare

Start with What Medicare Covers (and What It Doesn’t)

Let’s clear up a common misconception: Medicare is not a blank check for all medical expenses.

Here’s a quick snapshot:

• Part A covers hospital stays
• Part B handles outpatient care, like doctor visits and preventive services
• Part D is for prescription drugs
• Medicare Advantage (Part C) is a bundled alternative to Original Medicare



But even with all that, you’ll still face:

• Deductibles and copays
• Prescription costs (especially for specialty drugs)
• Dental, vision, and hearing expenses
• Long-term care (more on that shortly)

In fact, a recent estimate from Fidelity suggests that a 65-year-old couple retiring today may need around $315,000 for healthcare expenses throughout retirement. And that’s just the average.

Don’t Overlook Out-of-Pocket Costs

Even the best Medicare plan leaves room for surprises. Dental work, hearing aids, eyeglasses, and mobility equipment often fall outside of standard coverage.

We’ve had clients budget $1,500 a year for dental cleanings, only to be hit with a $6,000 bill for a root canal and crown. These kinds of curveballs are more common than you think.

Here’s how to stay ready:

• Build a separate healthcare reserve fund
• Review your supplemental coverage options (Medigap or Medicare Advantage)
• Understand which services require prior authorization to avoid surprise denials



Being proactive means fewer emergencies—and more financial control.

Consider Long-Term Care Insurance

This is the elephant in the room. Medicare doesn’t cover long-term custodial care—things like help with bathing, eating, or dressing. These are considered non-medical services, and they can cost a fortune.

• Assisted living: $4,500+/month
• Nursing homes: $8,000–$10,000/month
• Home care aides: $25–$30/hour

Without a plan, these expenses can eat through your savings quickly.

Enter: long-term care insurance. These policies can help cover the cost of services at home, in assisted living, or in a nursing facility. But it’s important to buy them before you need them. Premiums rise with age and health conditions.



A client of ours purchased a hybrid life and long-term care policy at 58. They locked in coverage for $300,000 of care benefits, plus a death benefit if the coverage wasn’t used. It gave them peace of mind—and options.

Use Health Savings Accounts (HSAs) Wisely

If you’re still working and enrolled in a high-deductible health plan, an HSA is one of the best tools available for retirement healthcare planning.

Why?

• Tax-deductible contributions
• Tax-free growth
• Tax-free withdrawals for qualified medical expenses

Unlike FSAs, HSAs don’t expire. So you can treat them like a stealth retirement account just for medical expenses.

Use current income to pay today’s bills, and let your HSA grow. In retirement, use it tax-free for:

• Medicare premiums (excluding Medigap)
• Prescription drugs
• Dental and vision expenses
• Qualified long-term care services



And yes, you can even use it to pay for COBRA or healthcare costs if you retire before Medicare kicks in.

Budget for Inflation

Medical costs tend to rise faster than general inflation. A prescription that costs $50 today could be $100 or more in 15 years.



When building your retirement income plan, assume healthcare expenses will rise by 5–6% annually. If you’re relying on fixed-income sources like pensions or Social Security, make sure your portfolio includes some growth assets that can keep pace.

Think of it this way: the “future you” deserves the same quality of care as the “current you.”

Explore Alternative Care Models

Some retirees are choosing new paths for their later years:

• Continuing Care Retirement Communities (CCRCs): Offer a range of care options on one campus, from independent living to skilled nursing
• Home-sharing arrangements: Reduce living and caregiving costs by living with a companion or caregiver
• Medicare Medical Savings Accounts (MSAs): A high-deductible Medicare Advantage plan paired with a savings account funded by Medicare

These aren’t for everyone, but they offer creative ways to manage costs and maintain independence.

Revisit Your Estate and Insurance Plans

Healthcare costs tie directly into legacy planning. If a medical event drains your accounts, what’s left for your heirs?

After age 60, revisit:

• Long-term care riders on life insurance
• Advance directives and healthcare proxies
• HIPAA release forms (to allow family to assist in care decisions)
• Gifting or trust strategies to shield certain assets from Medicaid spend-down rules



Even simple steps—like consolidating accounts and updating POAs—can reduce stress during medical events.

Final Thoughts

Healthcare costs in retirement are unpredictable, but your plan doesn’t have to be. By going beyond Medicare and looking at the full picture—long-term care, HSAs, inflation, and estate protection—you can stay in control no matter what your health throws your way.



Aligned Wealth Advisors helps clients map out a retirement plan that includes all the “what-ifs,” not just the easy stuff. Because peace of mind comes from knowing you’re covered—head to toe, today and tomorrow.

Andrea Ward, CPA

Andrea has worked in the finance industry for nearly all of her professional life. Taking over the family business she continues to combine her tax and investment knowledge to leverage the investment power of money while reducing gains taxes paid to the IRS. She lives in the Fort Worth, Texas area, (although is happy to work with virtual clients all over the United States!) Andrea loves to travel and dabble in home decorating.

Matt Ward

Matt began helping clients in the insurance industry. However, he struggled with big business’s emphasis on selling rather than helping, so he came to work with the family business focusing on investment advisory. In his free time, he shreds the gnar on his snowboard and jams on drums and guitar (but not at the same time).