Retirement Health Cost Strategies

Preparing for the Unseen, Ensuring Peace of Mind

Introduction to Managing Healthcare Costs

Many people look forward to retirement as a time to relax and enjoy life. However, rising healthcare costs can catch even the most diligent savers off guard. Factoring these expenses into your overall plan is essential for lasting peace of mind. Incorporating reliable income strategies, such as annuities, can help ensure you have the funds needed to cover both routine and unexpected medical bills.

Average Out-of-Pocket Health Care Costs in Retirement
According to Fidelity’s 2025 Retiree Health Care Cost Estimate, an average retired couple age 65 may need roughly $350,000 for health care expenses throughout retirement—excluding long-term care. Individual costs will vary.

Understanding Medicare

For most Americans age 65 and older, Medicare is the foundation of healthcare coverage. While it covers many needs, it doesn’t cover everything—services like dental, vision, and hearing are often excluded. Out-of-pocket costs, including co-pays and deductibles, can add up quickly. To fill these gaps, some retirees add Medigap or Medicare Advantage plans, each with its own premiums and rules.

• What Medicare Doesn’t Cover:
• Routine dental, vision, and hearing care
• Long-term care and custodial nursing home stays
• Most prescription drugs (unless you have Part D)

Why Annuities Help

Annuities can be a practical way to address healthcare expenses in retirement. They turn a portion of your savings into regular monthly income, providing predictable funds to help manage medical costs.

Consistent Monthly Income

An annuity delivers dependable income for life, making it easier to budget for healthcare—whether it’s for everyday prescriptions or major medical needs.

Protecting Your Finances

Healthcare costs typically increase with age. Having a steady income source from an annuity can help protect your financial stability, even as your needs change.

Potential for Growth

Certain annuities offer opportunities for growth tied to market performance. When markets do well, this growth can provide additional resources for rising or unexpected medical costs.

Tax Advantages

With tax-deferred growth, annuities allow your savings to compound until you begin withdrawals—helping you keep more of your money available for future healthcare needs.

How to Use Annuities for Healthcare Costs

If you’re considering annuities as part of your healthcare planning, keep these steps in mind:

• Assess Your Health Needs: Review your current health, family history, and possible future care requirements.
• Evaluate Your Savings: Determine what funds you can dedicate to healthcare-related expenses.
• Consult with Professionals: Seek advice from a retirement or insurance specialist who understands healthcare planning in retirement.
• Select the Right Annuity: Choose a product that fits your financial situation, time horizon, and comfort with risk.
• Review Regularly: Monitor your plan and make adjustments as your health and financial needs evolve.

Remember, both your health and the healthcare landscape can change over time. Revisiting your strategy every few years can help keep you prepared for whatever comes next.

Key Takeaways

• Healthcare costs are a major—and often underestimated—part of retirement.
• Even with Medicare, there are significant out-of-pocket expenses to plan for.
• Building a reliable income strategy helps ensure you’re prepared for both routine and unexpected expenses.
• Review your plan regularly as your health and financial needs change.

Final Thoughts

Healthcare costs are often one of the biggest unknowns in retirement. With rising expenses and gaps in Medicare coverage, having a reliable income strategy is more important than ever. Annuities can help provide the steady funds needed to manage these costs, so you can focus on enjoying retirement with greater confidence and security.