Make Room for Rising Healthcare Costs as Part of Your Retirement Planning

Does your retirement plan include strategies to plan for, manage, and even reduce healthcare costs in retirement?

It is projected that an average healthy 65-year-old couple retiring this year will incur total lifetime healthcare costs of $387,644 in today’s dollars, according to research by HealthView Services, a provider of retirement healthcare, long-term care and Social Security optimization tools for the financial services industry. The figures were released in early July.

To no surprise, as the couple ages, costs will be significantly higher later in retirement than at the beginning. In the first year of retirement, the couple’s total annual premium and out-of-pocket expenses may average $12,286. In twenty years, at age 85, you may need $34,268 to cover these costs.

These figures include Medicare premiums, Medigap or Medicare Supplemental premiums, dental and out-of-pocket costs related to hospitalizations, doctor visits, and drugs, among other items. (But they do not include long-term care.)

We recently wrote about the idea that traditional thinking suggests that, when you retire, you will need to replace less of your current income or what you were earning while you were employed, (generally, about 80%). We noted that some retirement specialists disagreed and even suggested as much as a 20% increase above what you might think you need – partly for higher travel and entertainment expenses during your “Go-Go” years, unexpected expenses and inflation.

We also called your attention to healthcare costs and spending. What is important to note here is that standard benchmarks about what percentage of your income you will need to replace in retirement may assume that a portion of your healthcare expenses are covered when they may not be. “New retirees, who generally paid approximately 25% of their medical premiums during their working years, are often surprised by the cost of healthcare in retirement, when they are responsible for 100%,” HealthView Services says in the white paper.

Another risk to think about when planning for healthcare costs is longevity, an important retirement risk we also address with you when it comes to income planning. On average, healthy Americans’ projected annual healthcare costs will be lower than those with health conditions. Yet, since they are expected to live longer, the lifetime costs they need to plan for will be higher.

Here’s an example. A healthy 55-year-old woman living to her actuarial longevity of 89 will need to plan, on average, for $424,875 in lifetime healthcare costs (future value, not today’s dollars). If she has Type 2 diabetes, her actuarial longevity falls to 80 and projected total costs would be $266,163, according to HealthView Services.

It’s never too soon to start planning because healthcare cost inflation, projected by HealthView Services to be 4.41%, and its compounding effect will drive higher healthcare expenses for those currently in their 40s and 50s.

On the bright side, Ron Mastrogiovanni, CEO of HealthView Services and HealthyCapital, says we’re not powerless when it comes to planning for future healthcare costs. “Taking steps to improve health can reduce annual medical expenses. Investing these savings, increasing contributions to retirement plans, and working with an advisor to optimize product selection with healthcare in mind can significantly reduce this retirement burden,” he said.

If you are a few years away from retirement, we can plan now to offset your potential future healthcare costs.

Call us to schedule a retirement plan checkup. We will review your income sources and expenses to fine tune and manage your plan so you stay on track for the healthy retirement lifestyle you want to experience. Call Strategic Financial AZ in Sedona and Flagstaff at 928-212-8000.


“Why Health Needs to Be Part of Retirement Planning,” July 8, 2019. HealthView Services. Retrieved from: Here is a link to the full white paper: