Planning for the future means preparing for more than just where you’ll live or how you’ll spend your time—it also means facing the reality of healthcare costs in retirement. From unexpected medical bills to long-term care and insurance gaps, these expenses can quietly erode your savings if you’re not ready. In this guide, we’ll break down what to expect, what it could cost, and how smart estate planning—like setting up a living trust—can help you protect your assets and your legacy.
Here’s a preview of what we’ll cover in this article:
- Why Healthcare Costs Are a Retirement Planning Priority
- Major Healthcare Expenses in Retirement
- How These Costs Can Erode Retirement Savings
- Estate Planning Strategies to Protect Against Healthcare Costs
- The Trust Guru Approach to Retirement Planning
- Frequently Asked Questions
Why Healthcare Costs Are a Retirement Planning Priority
Healthcare costs in retirement aren’t just a line item in your budget—they’re a growing, often underestimated threat to your long-term financial security. As lifespans increase and medical care becomes more advanced (and expensive), retirees face mounting expenses that can chip away at even the most carefully built nest egg. Planning for these costs is essential not only to protect your savings but also to ensure a smoother transfer of wealth to your loved ones.
The Rising Price of Health and Aging
Today’s retirees are living longer, which is good news—but with longer life comes higher healthcare expenses. Chronic illness management, ongoing prescriptions, and specialist visits become more common with age. Add healthcare inflation to the mix, and what you might expect to pay today could double in the next 10 to 20 years.
According to Fidelity’s 2024 Retiree Health Care Cost Estimate, a 65-year-old retiring couple can expect to spend an average of $315,000 on healthcare throughout retirement. That figure doesn’t include long-term care, dental, or vision expenses—costs that can add tens of thousands more. And because Medicare doesn’t cover everything, especially services like custodial care or certain prescription drugs, retirees are left to fill the gaps out-of-pocket or through supplemental insurance.
This rise in cost isn’t just about hospital stays or surgeries—it’s about the everyday expenses that add up: medications, doctor visits, therapies, and ongoing condition management. These can silently drain retirement savings without a plan in place.
The Cost Burden on a 65-Year-Old Couple
Let’s take a closer look at the real numbers. Fidelity’s estimates show that a typical 65-year-old couple retiring today will need that $315,000 just to cover premiums and out-of-pocket medical costs during retirement. That doesn’t account for long-term care, which Genworth Financial reports can cost over $100,000 per year for a private room in a nursing home.
What’s more, a recent Health and Retirement Study conducted by the University of Michigan found that more than 70% of retirees will need some form of long-term care. That means the likelihood of incurring major healthcare costs later in life is high—even if you’re healthy now.
This data makes one thing clear: Without proper planning, healthcare expenses can seriously undermine your retirement income strategy and jeopardize the legacy you intend to leave behind.
Key Takeaway:
Healthcare costs in retirement are rising fast and can quickly eat into your savings. Understanding the scope of these expenses is the first step toward protecting your assets—and your peace of mind—with smart, forward-thinking planning.
Major Healthcare Expenses in Retirement
Healthcare costs in retirement are rising fast and can quickly eat into your savings. Understanding the scope of these expenses is the first step toward protecting your assets—and your peace of mind—with smart, forward-thinking planning.
Out-of-Pocket Medical Costs
Even with Medicare, retirees often face significant out-of-pocket medical costs. These include deductibles, co-payments, and coinsurance—expenses that can add up quickly when managing chronic conditions or undergoing specialized treatments.
For example, Medicare Part B (which covers doctor visits and outpatient care) comes with a monthly premium and an annual deductible. After meeting the deductible, you’re still responsible for 20% of the approved service cost, with no upper limit. That means if you require surgery or regular therapy, those out-of-pocket medical costs can run into thousands of dollars annually.
Supplemental health insurance (often called Medigap) can help reduce some of these expenses, but it comes at an additional premium—yet another cost to factor into your retirement budget.
Long-Term Care and Nursing Homes
Long-term care is one of the most significant and unpredictable healthcare expenses in retirement. This includes services like in-home care, assisted living, or nursing home stays—most of which are not covered by Medicare.
According to Genworth’s 2023 Cost of Care Survey:
- The median annual cost of a private room in a nursing home is over $108,000
- Assisted living facilities average around $54,000 per year
- In-home health aides can cost over $61,000 annually
What’s especially important to note is that eligibility for Medicaid (which can help cover these costs) often requires spending down personal assets first—something most retirees would rather avoid. Planning ahead through estate tools like trusts can help protect assets from being consumed by these expenses. Understanding Medicaid Asset Protection Trusts can be a crucial part of planning to protect those assets ahead of time.
Prescription Drug and Medicare Gaps
Prescription medications can become a major line item for retirees, especially those managing chronic conditions. While Medicare Part D helps cover prescription drugs, it doesn’t eliminate the costs entirely.
Retirees may still face:
- Monthly premiums
- Annual deductibles
- Coinsurance (a percentage of the drug cost)
- The “coverage gap” or “donut hole,” where out-of-pocket costs temporarily increase
Medicare Part A (hospital insurance) and Part B (medical insurance) also leave certain gaps. For instance, they don’t cover most dental, vision, hearing, or long-term care needs, which means retirees must either pay out-of-pocket or purchase separate insurance policies.
Dental, Vision, and Hearing Care
These often-overlooked expenses can be surprisingly costly in retirement—and they’re not covered by original Medicare. From routine exams to hearing aids and dental procedures like crowns or implants, these costs come directly out of your pocket unless you have a supplemental insurance plan.
On average:
- A single crown can cost $1,000–$2,500
- Hearing aids may run $4,000–$6,000 for a pair
- Annual eye exams, glasses, and dental cleanings can add several hundred dollars more
Without planning, these “minor” expenses can turn into a significant financial burden over time.
Key Takeaway:
Retirement healthcare costs come in many forms—from ongoing prescriptions and deductibles to long-term care and dental work. Identifying these risks now allows you to build a more complete retirement strategy and take steps to protect your savings from being drained by medical expenses.
How These Costs Can Erode Retirement Savings
Even a well-funded retirement plan can be undermined by the steady—and often unexpected—drain of healthcare expenses. From mounting insurance premiums to long-term care needs, these costs can slowly chip away at your retirement savings, impacting not only your lifestyle but also the legacy you plan to leave behind.
The Silent Drain on Retirement Funds
Healthcare costs in retirement rarely hit all at once—they accumulate gradually, silently eating into your savings. Retirees often draw from IRAs, 401(k)s, or other investment accounts to cover out-of-pocket medical bills, long-term care, and insurance premiums. While it may seem manageable in the short term, over a 20- to 30-year retirement, these recurring expenses can take a substantial toll.
Consider this: The average couple retiring at age 65 is expected to pay over $300,000 in medical expenses throughout retirement, not including long-term care. If those costs are pulled from tax-deferred accounts like a traditional IRA or 401(k), retirees must withdraw even more to account for income taxes—further accelerating the depletion of their portfolios.
This slow erosion can jeopardize other financial goals, such as charitable giving, family inheritances, or simply maintaining a comfortable lifestyle. And because market returns can vary year to year, making large withdrawals for healthcare during a market downturn can cause irreversible losses—commonly referred to as “sequence of returns risk.”
Why Planning Ahead Matters
The good news is that this erosion isn’t inevitable. With proactive planning, you can create a strategy that both anticipates healthcare costs and preserves your assets for long-term needs and legacy goals.
One approach is to allocate a portion of your investment portfolio specifically for medical expenses—especially those likely to increase over time, like annual health care and insurance premiums. Tools like Health Savings Accounts (HSAs) offer tax-free growth and withdrawals when used for qualified medical expenses, making them an excellent vehicle to save for retirement health needs.
You can also reduce your tax burden by strategically withdrawing from different account types—balancing between taxable, tax-deferred, and tax-free sources. Doing so can extend the life of your retirement income and reduce the impact of unexpected healthcare bills. For guidance on this topic, explore retirement savings contributions and withdrawals for seniors.
Ultimately, planning for healthcare costs isn’t just about budgeting—it’s about safeguarding your retirement income and preserving your family’s financial future. The earlier you start, the more control you have over how your assets are spent—and protected.
Key Takeaway:
Without a strategy, rising healthcare expenses can quietly drain your retirement savings. Early, intentional planning—including tax-efficient withdrawals and dedicated healthcare funding—can help you maintain financial stability and preserve your legacy.
Estate Planning Strategies to Protect Against Healthcare Costs
When it comes to managing healthcare costs in retirement, financial preparation is only half the battle. Without a solid estate plan in place, medical expenses—especially those tied to long-term care—can jeopardize not only your savings but the wealth you intend to pass on. Incorporating tools like living trusts and Health Savings Accounts (HSAs) into your estate planning strategy can help preserve your financial legacy and reduce the burden on your loved ones.
How a Living Trust Helps Preserve Wealth
A living trust is one of the most effective estate planning tools to protect your assets from being consumed by medical bills or tied up in probate. Unlike a will, which becomes public and must go through a potentially lengthy court process, a living trust allows your assets to transfer privately and efficiently to your beneficiaries.
Here’s how it works:
- Avoid Probate: By placing your assets in a trust, you sidestep probate entirely, saving your heirs time, legal fees, and stress.
- Maintain Control: You can set clear instructions for how and when your assets are distributed, ensuring protection for vulnerable heirs, like children with disabilities or those facing financial instability.
- Protect from Medical Collections: If properly structured, assets held in a trust may be shielded from certain creditors or claims—including some healthcare-related collections.
For retirees managing complex health needs, a trust offers peace of mind, ensuring their estate is protected and distributed according to their wishes—without being derailed by unexpected medical expenses.
Planning for Long-Term Care Through Trusts
Long-term care can quickly deplete a retirement portfolio. Fortunately, trusts can be used to proactively address these expenses. By incorporating long-term care planning into your estate documents, you can earmark assets for future medical needs while preserving other parts of your estate for your family.
Some strategies include:
- Setting up an irrevocable trust to protect assets and potentially qualify for Medicaid long-term care coverage.
- Designating funds in the trust for future caregiving needs or in-home medical support.
- Ensuring continuity of care by outlining your preferences for long-term care services in the trust documents.
In addition, you can integrate provisions that cover qualified medical expenses, ensuring trustees are empowered to use funds appropriately when healthcare needs arise.
Role of Health Savings Accounts (HSAs)
A Health Savings Account (HSA) can be a powerful, tax-advantaged tool for retirement healthcare planning—and it can also work hand-in-hand with your estate plan.
Key benefits of HSAs include:
- Triple tax advantages: Contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are also tax-free.
- No expiration: Unlike flexible spending accounts (FSAs), HSAs roll over annually, allowing funds to accumulate into retirement.
- Estate transfer options: While HSAs don’t pass through a trust, they can be left to a spouse tax-free, or to other beneficiaries with planning to reduce tax impact.
Real-Life Example:
Consider John and Linda, a retired couple in their early 70s. They established a living trust and set aside a portion of their portfolio to cover potential healthcare costs, including in-home care.
When Linda developed early-stage dementia, the trust allowed for immediate, pre-approved disbursements for care, preventing disruptions to their finances and shielding their adult children from having to make rushed financial decisions. Their estate remained intact, and their care continued smoothly—just as they’d planned.
Key Takeaway:
Strategic estate planning—especially using living trusts and HSAs—offers essential protection against the financial impact of healthcare costs in retirement. These tools help preserve your assets, support long-term care planning, and ensure your legacy is passed on as intended.
The Trust Guru Approach to Retirement Planning
At Trust Guru, we understand that planning for healthcare costs in retirement isn’t just about numbers—it’s about protecting your family, preserving your wealth, and creating peace of mind for the future. That’s why we’ve designed a process that’s as personalized as it is powerful, making estate planning approachable, efficient, and legally sound.
Personalized, Legally Sound Living Trusts
No two families are the same—and your estate plan shouldn’t be either. Trust Guru offers customized living trust solutions that are tailored to your financial situation, family dynamics, and long-term care considerations. Whether you’re safeguarding investment accounts, planning for potential medical expenses, or preparing to support a loved one with special health needs, our team works with you to create a plan that fits your life.
Every trust is reviewed by experienced legal professionals to ensure compliance across all 50 states, giving you the confidence that your plan isn’t just convenient—it’s legally airtight. From avoiding probate to controlling how and when your assets are distributed, Trust Guru helps you build a trust that protects what matters most.
Seamless Digital Process
Estate planning can feel overwhelming—but it doesn’t have to be. With Trust Guru, you can set up your living trust entirely online, from the comfort of your home. Our streamlined digital process walks you through a step-by-step questionnaire, with clear guidance at every turn. No confusing legal language. No court visits. Just straightforward, expert-backed solutions designed to fit your busy life.
Behind the scenes, our legal advisors ensure everything is done right the first time. Whether you’re planning for future healthcare expenses or updating your estate strategy, our support team is here to help you personalize your plan and get it done quickly and confidently.
Ready to Take the First Step?
Don’t wait until medical expenses threaten your retirement savings. Schedule your free consultation with Trust Guru today and discover how easy it is to protect your assets, your health, and your legacy—all with one smart, customized plan.
Frequently Asked Questions
Estimates vary, but according to Fidelity’s 2023 Retiree Health Care Cost Estimate, an average 65-year-old couple retiring today should expect to spend approximately $315,000 on healthcare expenses throughout retirement. This includes premiums, deductibles, and other out-of-pocket medical costs but excludes long-term care, dental, and vision coverage. Budgeting for retirement health care should factor in inflation, your health status, and whether you have supplemental insurance or a Health Savings Account (HSA).
No, traditional Medicare does not cover most long-term care services. While Medicare may pay for short-term stays in a skilled nursing facility or limited home health care under specific conditions, it does not cover custodial care like assistance with bathing, dressing, or eating. For broader long-term care services, retirees must rely on private long-term care insurance, Medicaid (with asset qualification), or self-funding—making advance planning essential.
To shield your estate from rising healthcare expenses, consider creating a living trust and exploring long-term care planning strategies. A living trust helps avoid probate and provides structured control over asset distribution, while irrevocable trusts can help protect assets from being spent down to qualify for Medicaid. Additionally, building up a Health Savings Account (HSA) and planning tax-efficient withdrawals from your portfolio can help cover healthcare costs without depleting your retirement savings.
Even with Medicare, retirees often pay out-of-pocket for:
Deductibles and coinsurance under Medicare Parts A and B
Prescription drug copays under Part D
Supplemental insurance premiums (e.g., Medigap)
Dental, vision, and hearing care, which are not covered by original Medicare
Medical equipment, therapies, and ongoing treatments
These out-of-pocket medical bills can average thousands of dollars annually depending on health conditions and coverage gaps.
Absolutely. A living trust plays a vital role in protecting assets from being consumed by medical costs while ensuring a smooth and private transfer of wealth. By structuring your trust with healthcare contingencies in mind, you can allocate funds for future care, avoid probate, and ensure your wishes are followed—even if you become incapacitated. It’s a proactive way to manage retiree health care planning while preserving your legacy.
