Why Healthcare Costs in Retirement Keep Blindsiding Clients—And What You Can Do About It
Medicare isn’t the safety net your clients think it is—and the gap between expectation and reality is where financial plans fall apart.
The Retirement Lie Nobody’s Talking About
Ask the average pre-retiree how much they'll spend on healthcare in retirement, and you’ll likely hear: “Isn’t Medicare supposed to cover that?”
Now compare that to the $413,000 an average American couple may need for medical expenses during retirement. That’s not a typo. It’s a ticking time bomb. And it’s detonating quietly, one copay, premium, and uncovered service at a time.
As financial professionals, we’re either the first line of defense—or part of the problem.
Where the Gap Starts: The Myth of Medicare
Medicare was never designed to cover everything. Yet many clients (and frankly, some advisors) treat it like it’s comprehensive coverage. It’s not.
Here’s what it doesn’t fully cover:
Long-term care services
Dental, vision, and hearing
Prescription drug out-of-pockets
Deductibles and coinsurance
High-cost specialty medications
Add that up, and it’s no wonder Medicare households spend more than double what non-Medicare households do on healthcare—13.6% of their total spending, to be exact.
The Real Risk: Under-Prepared, Overwhelmed Retirees
Most retirees aren't just surprised by the cost—they’re overwhelmed by the complexity. Many don’t know:
Which supplemental plan to buy (if any)
Whether to stay on an employer plan post-retirement
How to use HSAs effectively
That long-term care isn't covered by Medicare
This is where great advisors stand apart from salespeople. Because this isn’t a product conversation—it’s a protection strategy.
The Toolkit: Solutions that Actually Work
Here’s what forward-thinking professionals are doing differently:
1. Start the Healthcare Conversation Early
By age 55, every retirement plan should include a line item for out-of-pocket medical expenses, indexed for inflation. If you wait until 65, you’re late.
2. Use Health Savings Accounts (HSAs) Strategically
HSAs are the unicorn of retirement tools: tax-deductible going in, tax-deferred while growing, and tax-free coming out—as long as funds are used for qualified medical expenses.
Bonus tip: HSAs can even be used to pay Medicare Part B, Part D, and Medicare Advantage premiums after age 65.
3. Bundle Life Insurance with Long-Term Care Riders
If standalone LTC insurance feels like a hard sell, especially given rising premiums and underwriting hurdles, consider hybrid life + LTC products. They’re flexible, benefit-rich, and address both legacy and care needs in one chassis.
4. Don’t Ignore Medigap and Medicare Advantage Planning
Educate clients on the pros and cons. Medigap may offer better access and lower out-of-pocket exposure, but comes with higher premiums. Medicare Advantage plans may seem cheap, but can be expensive when you need care the most.
Ethics Check: Are You Leading or Just Selling?
This is where the industry needs to do some soul-searching. Too many plans still assume healthcare is “covered” and gloss over the risks—because those risks don’t always sell well.
But here’s the thing: The most valuable thing we offer isn’t a policy. It’s peace of mind.
That means:
Building plans that are realistic, not optimistic
Educating clients on what Medicare won’t pay for
Stress-testing retirement income projections with real medical expense scenarios
Advocating for financial literacy around healthcare—not just financial literacy in general
The Takeaway: Retirement Healthcare Planning Is Risk Management
If your retirement plan doesn’t account for long-term care, increasing premiums, and uncovered services, it’s not a plan. It’s a best-case scenario.
Retirement healthcare isn’t just another expense—it’s a risk multiplier.
So let’s treat it that way.
