Preparing for Health Care Costs in Retirement

What Every Future Retiree Should Know

For many Americans, one of the biggest financial surprises in retirement isn't travel, hobbies, or helping with the grandkids. It's health care.

While Medicare provides valuable coverage beginning at age 65 for most people, it doesn't eliminate medical expenses. Premiums, deductibles, copays, prescription costs, dental care, vision services, hearing aids, and long-term care can all create significant out-of-pocket costs. And for those who retire before age 65, the costs can be even higher.

The good news is that, with thoughtful planning, you can prepare for these expenses and avoid having health care derail your retirement goals.

How Much Should You Expect to Spend?

The Employee Benefit Research Institute (EBRI) estimates that Medicare beneficiaries spend an average of about $4,000 annually in out-of-pocket health care expenses, not including insurance premiums.

Those costs include expenses such as:

• Deductibles and copays

• Coinsurance

• Prescription medications

• Dental and vision care

• Other routine medical expenses

While recurring costs tend to remain fairly predictable, unexpected health events, such as a heart attack, stroke, cancer diagnosis, or major surgery, often create the largest financial burden.

EBRI found that adults ages 65 through 84 spend roughly $4,000 annually on out-of-pocket medical costs, while households age 85 and older average more than $6,000 each year as health care needs increase.

Retiring Before 65? Plan for Much Higher Health Insurance Costs

If you're planning to retire before becoming eligible for Medicare at age 65, health insurance may become one of your largest retirement expenses.

Without employer-sponsored coverage, many early retirees purchase insurance through the Affordable Care Act (ACA) Marketplace, a spouse's employer plan, COBRA (temporarily), or a private individual policy.

How much should you budget?

A reasonable planning estimate for many early retirees is:

• $8,000 to $10,000 annually for an individual

• $18,000 to $25,000 annually for a couple

Your actual costs will depend on several factors, including:

• Your age

• Household income

• State of residence

• Tobacco use

• The level of coverage you choose

• Whether you qualify for ACA premium tax credits

Keep in mind that premiums are only part of the equation. You'll also want to budget for deductibles, copays, coinsurance, and prescription costs. Many financial planners recommend setting aside an additional $2,000 to $5,000 per person per year for out-of-pocket medical expenses, depending on your health and chosen plan.

For households retiring several years before Medicare eligibility, these expenses can total well into six figures, making health care one of the most important line items in any retirement income plan.

Don't Overlook Long-Term Care

One of the greatest financial risks in retirement is the potential need for long-term care.

Many people mistakenly believe Medicare pays for nursing home care. In reality, Medicare generally covers only short-term skilled nursing care following a qualifying hospital stay. It does not pay for ongoing custodial care, such as assistance with bathing, dressing, eating, or other daily activities.

Long-term care costs continue to rise nationwide. According to Genworth's Cost of Care Survey, average annual costs commonly exceed:

• More than $100,000 for a private nursing home room

• Over $60,000 for assisted living

• Tens of thousands annually for home health aides and adult day services

Without a plan, even a relatively short stay in a care facility can significantly reduce retirement assets.

Five Ways to Prepare

Fortunately, there are several steps you can take today to prepare for health care expenses in retirement.

If you're still working and enrolled in a qualified high-deductible health plan, a Health Savings Account (HSA) remains one of the most tax-efficient ways to save for future medical expenses.

HSAs offer three valuable tax advantages:

• Tax-deductible contributions

• Tax-deferred investment growth

• Tax-free withdrawals for qualified medical expenses

Unlike Flexible Spending Accounts, unused balances carry over indefinitely, making HSAs an excellent retirement savings tool. Just remember that once you're enrolled in Medicare, you can use the HSA to pay for expenses, but you can no longer contribute to it.

Missing your Medicare enrollment window can result in permanent late enrollment penalties.

Most people become eligible at age 65, with a seven-month Initial Enrollment Period beginning three months before their birthday month and ending three months afterward. If you're still working, your enrollment options may differ depending on your employer's size and coverage.

Original Medicare leaves beneficiaries responsible for several out-of-pocket costs.

Many retirees choose Medicare Supplement or Medicare Advantage plans to help manage expenses and, depending on the plan, receive additional benefits such as dental, vision, hearing, or wellness programs. Since benefits and provider networks can change annually, reviewing your coverage every year is a smart habit.

Long-term care insurance may help cover services that Medicare generally does not, including:

• Nursing home care

• Assisted living

• Home health care

• Adult day care

• Certain hospice-related services

Premiums are generally lower and underwriting is easier when coverage is purchased before significant health issues develop.

A major illness can create expenses that go far beyond hospital bills.

Critical illness insurance provides a lump-sum cash benefit after the diagnosis of certain covered conditions, such as heart attack, stroke, cancer, kidney failure, or organ transplant, depending on the policy. The money can be used however it's needed, from paying deductibles and travel expenses to replacing lost income or covering everyday household bills.

Prepare Now, Worry Less Later

Health care is one of the few retirement expenses that almost everyone can expect to increase over time. Whether you're planning to retire at 55, 62, 65, or later, understanding your potential medical costs—and creating a strategy to address them—can help protect your retirement savings and provide greater financial confidence.

The earlier you begin planning for insurance premiums, Medicare decisions, long-term care, and unexpected medical expenses, the more options you'll have when retirement arrives.

If you'd like help evaluating your Medicare options, planning for early retirement health insurance, or exploring supplemental coverage, we're happy to answer your questions and help you understand the choices available.

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The Role of Life Insurance in Disaster Preparedness

By Newhouse Financial Group • September 1, 2026

When we talk about disaster preparedness, most people think about emergency kits, canned goods, flashlights, and home evacuation plans. Some may even include homeowners or renters insurance in their checklist. But one crucial element is often overlooked: life insurance. While it may not seem like an immediate necessity when preparing for floods, wildfires, hurricanes, or earthquakes, life insurance plays a vital role in providing financial protection and peace of mind when the unexpected strikes. Why Financial Protection Matters in a Crisis Disasters, by nature, are unpredictable. They can upend lives in seconds, leaving families not only grieving, but also scrambling to manage expenses, cover debts, and rebuild. In the unfortunate event of a fatality during a disaster, the financial burden placed on surviving family members can be overwhelming. Life insurance helps to alleviate that burden. It offers a tax-free payout—known as a death benefit—that can help families cover funeral expenses, keep up with mortgage payments, manage day-to-day living costs, and plan for long-term needs like children’s education or retirement savings. It serves as a lifeline during the most difficult of times, helping loved ones maintain stability while navigating their grief. Support Beyond Loss: Life Insurance as a Financial Resource Life insurance doesn’t only serve its purpose in the event of death. Certain types of life insurance—particularly whole and universal life policies—accumulate cash value over time. That value can be accessed or borrowed against during emergencies. This is particularly important in disaster scenarios where families may be displaced, out of work, or waiting on slow-moving government aid or insurance claims. Having access to emergency funds through a life insurance policy can help pay for temporary housing, replace lost income, or cover other unexpected expenses that arise in the wake of a disaster. Filling the Gaps Left by Property Insurance Many people rely solely on homeowners or renters insurance to protect their assets, but these policies have limitations. They often exclude certain types of damages or may take weeks or months to payout, leaving families in a financial bind during recovery. Life insurance fills a different but equally important role by protecting the people—not just the property. It ensures that those who rely on your income or care will still be taken care of, no matter what happens. Business Owners: Safeguarding Operations and Legacy For small business owners, the stakes can be even higher. Disasters don’t just affect homes—they can also destroy businesses. In these situations, life insurance can play a critical role in protecting business continuity. It can fund buy-sell agreements, protect against the loss of a key employee or partner, and even serve as collateral for business loans. This type of coverage ensures that the company can survive long enough to recover or be transferred to new ownership, safeguarding not only the owner's legacy but also the livelihoods of employees and their families. Choosing the Right Coverage for Your Needs Selecting the right type of life insurance depends on your specific needs and goals. Term life insurance is typically more affordable and provides coverage for a set period, making it ideal for young families or those on a budget. Permanent policies like whole or universal life offer lifetime coverage and a savings component, which can be especially useful for long-term planning and emergency preparedness. Many insurers also offer policy riders—such as living benefits, critical illness coverage, or disability waivers—that can enhance your protection in high-risk situations, including natural disasters. Plan Ahead, Not After the Fact Ultimately, disaster preparedness isn’t just about having the right tools or supplies—it’s about having a plan that protects every aspect of your life, including the financial future of your loved ones. Life insurance is a critical part of that plan. It ensures that in the midst of chaos, your family or business won’t be left to pick up the financial pieces alone. The time to prepare is always before disaster strikes. Review your existing insurance policies, evaluate your family’s needs, and speak with a trusted advisor to determine the type and amount of life insurance that makes sense for your situation. With the right policy in place, you’ll be one step closer to protecting what matters most—no matter what tomorrow brings.