Retirement Healthcare Planning: 7 Strategies for Protecting Your Wealth from Medical Costs

Peter Pabich |
Categories
Retirement
Health

At Entrust Wealth Partners, we understand that protecting your wealth is about more than just managing investments—it’s about preparing for life’s most significant expenses. For high-net-worth individuals, rising healthcare costs can pose a unique challenge in retirement. According to Fidelity’s latest Retirement Health Care Cost Estimate, an average retired couple age 65 in the U.S. may need around $315,000 saved to cover healthcare expenses during retirement. But with proactive planning and the right strategies, you can safeguard your financial legacy while ensuring access to top-tier medical care.

Here are seven key strategies to ensure your healthcare needs don’t derail your retirement plans:

1. Understand Your Healthcare Costs

The first step in protecting your wealth is understanding the potential medical expenses you may face in retirement. These can include:

  • Medicare premiums, deductibles, and co-pays

  • Prescription drug costs
  • Long-term care services

  • Dental, vision, and hearing care (often not covered by Medicare)

Proactively estimating these costs based on your health status and retirement timeline can help you avoid unpleasant surprises.

2. Maximize Your Medicare Benefits

Medicare is the cornerstone of retirement healthcare planning, but it can be complex. Consider the following to optimize your coverage:

  • Enroll on Time: Avoid late enrollment penalties by signing up during your initial enrollment period.

  • Evaluate Supplemental Plans: Medicare Supplement Insurance (Medigap) or Medicare Advantage plans can help fill gaps in traditional Medicare coverage.

  • Compare Prescription Drug Plans: Medicare Part D plans vary in costs and coverage. Choose one that aligns with your medication needs.

3. Leverage Health Savings Accounts (HSAs)

If you’re still working and have a high-deductible health plan, contributing to an HSA is a smart move. HSAs offer triple tax advantages:

  • Contributions are tax-deductible.

  • Growth is tax-free.

  • Withdrawals for qualified medical expenses are tax-free.

In retirement, HSAs can be a powerful tool for covering healthcare costs, including Medicare premiums, long-term care, and other out-of-pocket expenses.

4. Plan for Long-Term Care

Long-term care (LTC) is one of the most significant and unpredictable expenses retirees face. Here are ways to prepare:

  • LTC Insurance: Purchasing a long-term care insurance policy can help cover costs for services such as assisted living, nursing homes, and in-home care.

  • Hybrid Policies: Consider life insurance or annuities with long-term care riders. These products provide flexibility and value if LTC isn’t needed.

  • Self-Funding: If you have substantial assets, create a dedicated fund for long-term care expenses.

5. Incorporate Healthcare Costs into Your Financial Plan

Your retirement plan isn’t complete without accounting for healthcare. Work with a financial advisor to:

  • Create a detailed budget that includes projected medical expenses.

  • Stress-test your portfolio to ensure it can withstand rising healthcare costs.

  • Evaluate your withdrawal strategy to ensure tax efficiency when covering healthcare expenses.

6. Stay Healthy to Reduce Costs

Prevention is often the best cost-saving strategy. Focus on maintaining your health through:

  • Regular check-ups and preventive care

  • A balanced diet and regular exercise

  • Managing chronic conditions proactively

Not only does this improve your quality of life, but it can also reduce your medical expenses in retirement.

7. Consider Tax-Advantaged Strategies

Certain tax strategies can help you manage healthcare expenses more effectively:

  • Deduct qualified medical expenses if they exceed a certain percentage of your adjusted gross income.

  • Use Roth IRAs or HSAs to cover healthcare costs tax-free.

  • Convert traditional IRA funds to a Roth IRA to reduce taxable income in retirement, potentially lowering Medicare premiums.

Take Action

Retirement healthcare planning is essential to protecting your wealth and ensuring a comfortable future. By understanding your options, leveraging tax-advantaged accounts, and proactively preparing for potential costs, you can safeguard your financial well-being.

At Entrust Wealth Partners, we specialize in helping high-net-worth individuals navigate these complexities with personalized strategies tailored to their goals. Contact us today to learn how we can help you create a robust retirement healthcare plan that aligns with your broader wealth management strategy. Together, we can ensure that your financial future is as healthy as you are.