Longbridge Financial - Understanding Healthcare Challenges in Retirement

Understanding Retirement Challenges: Healthcare

What can I expect my healthcare expenses to be in retirement? How much of my care will be covered by Medicare? Will my health insurance rates ever stop increasing? How will I fund advanced or long-term care if required? If you’ve ever asked yourself any of these questions, you’re in good company.

While most of us have given considerable thought as to where and how we’ll live out those long-awaited retirement years, few are well-versed in preparing for future healthcare expenses. As a matter of fact, a recent study found that just 15% of pre-retirees have ever attempted to estimate how much money they may need to have saved for healthcare and potential long-term care in retirement1.

Despite being underprepared financially, today’s retirees rate health a top ingredient for a happy retirement. As an increasing number of Baby Boomers move into advanced years, health can be the difference between a retirement of opportunity, independence, and financial security and one of worry and financial challenges.

But properly preparing for healthcare expenses in retirement starts with an understanding of the potential costs and financial responsibilities that lay ahead.

The Price Tag of Today’s Healthcare

They say that health is wealth … and while it’s something we’d all certainly like to be rich in, today’s reality is that health often comes at a significant cost. Of all the expenses retirees face, healthcare is among the most burdensome. And with costs ranging from Medicare premiums to prescription drugs, it’s easy to see how healthcare expenses can quickly eat through a large portion of retirement savings. Just consider this—the projected lifetime expenses for a healthy 65-year-old couple now hovers at about $400,000 dollars2. What’s more, 59% of total Social Security benefits is needed to fund healthcare in retirement2—and this number is only expected to grow.

The statistics are alarming and the numbers may seem astronomical. Thankfully, there are some measures you can take to lower your healthcare costs in retirement. Consider some of the following ways to save money on healthcare in retirement.



Take Advantage of Medicare Services

The primary insurer for those ages 65 and older, Medicare provides access to a range of benefits designed to help you take charge of your health. Better yet, provided that you’ve paid your dues in the workforce for at least 10 years, you’ll qualify for Medicare Part A services free of charge, including hospital stays, nursing facilities, and hospice care. However, despite the services offered via Medicare, many seniors neglect to enroll, thus missing an opportunity to get ahead of any potential health issues. Some of the benefits that make Medicare truly worthwhile include a free annual wellness visit in addition to many critical health examinations, including certain cancer screenings and diabetes testing.

They say that prevention is the best medicine; and capitalizing on these free preventive services can go a long way toward keeping you healthy—and your healthcare budget in check. Just be mindful to sign up for Medicare at the correct designated time to avoid gaps in coverage and/or late enrollment penalties or fees.


Supplement Medicare Coverage

While Medicare offers an array of no-cost preventive health services, it’s important to realize that the program doesn’t cover everything. In fact, Medicare covers less two-thirds of retirement healthcare expenses2. To cover the remaining deductibles, co-pays, and out-of-pocket expenses, many people opt to purchase a supplemental plan, known as Medigap—or the all-in-one coverage Medicare Advantage Plan.

Designed to mimic the coverage offered by traditional Medicare, these plans offer a wider range of benefits and coverage for common services such as dental care, vision, and hearing aids. Better yet, these plans are often comparable in cost to traditional Medicare—and, in some cases, may even cost less. And while out-of-pocket costs are virtually limitless with Medicare, most Medigap and Medicare Advantage plans put a cap on out-of-pocket expenses—saving you more cash.


Price Shop Prescription Drug Plans

Once enrolled in Medicare, you’ll need an additional Part D or prescription drug plan to cover the costs of your medications. But not all plans are the same. To see which ones offer the best deals on your medication(s), you’ll need to do ample research and comparison shopping. And even after you’ve found a cost-effective plan, the shopping doesn’t stop there.

As your prescription needs and medications change throughout retirement, you may find that a certain Part D plan is better suited for your needs or saves you more money than another—including your current plan. Having said that, it (literally) pays to be a savvy shopper!


Consider Long-Term Care Insurance

With so many unknowns about your health in the future, it can be very easy to put planning for long-term care on the backburner. However, with an estimated 70% of seniors age 65 and older requiring some form of long-term care in their lifetime2, not planning ahead could be a potentially costly mistake. From assistance in carrying out daily tasks such as bathing and dressing, to comprehensive, specialized medical care, today’s long-term care services are designed to address and accommodate a variety of needs and challenges. But it’s no secret that these services come at a rather significant cost.

Just consider this: assisted living facilities cost an average of $4,000 per month, while 40 hours per week of in-home care totals an average of $4,8003. How’s that for sticker shock? The good news is that you don’t necessarily have to pay for these services out of pocket. Purchasing a long-term care insurance policy helps to cover these expenses—and protect your finances in the future. The earlier you apply, the more likely you will be approved – and secure a health-based discount on your premiums. While you will pay for coverage each year, the premiums could wind up saving you significantly more than what you would have otherwise spent in the long run.


Invest in Your Health

This final tip isn’t specifically financial, but it could help to manage your retirement healthcare tab. Invest in your health. It goes without saying, but the healthier you are, the less likely it’ll be that you’ll need to shell out a large chunk of your retirement savings on frequent, accumulating healthcare expenses. And as today’s seniors are more active than previous generations and have increasing lifespans, maintaining good health in retirement is a top priority.

Simple measures to improve your health include getting proper nutrition and maintaining an active lifestyle—both physically and socially. You’ll also want to make routine appointments with your healthcare providers and address health issues before they escalate. After all, even the most minor of health issues can quickly become major ones when left untreated—not to mention major expenses.


When it comes to retirement, healthcare costs are a top concern among Americans. And understandably so—expenses related to healthcare can easily account for a large share of your retirement budget. But with some preparation and proactive planning, you’ll be better equipped to lower your expenses and maintain your nest egg well into retirement years.

And if you could use another source of cash flow to fund your retirement expenses, a Home Equity Conversion Mortgage (HECM) —or reverse mortgage—can help. Available to homeowners age 62 and older, a reverse mortgage allows you to access a portion of the equity in your home to use as you wish – such as helping to manage healthcare expenses, set aside funds to cover long-term care in the future, or even make modifications to your home to comfortably age in place.

See why 94% of borrowers enjoy improved peace of mind as a result of a reverse mortgage4. For more information, contact the Longbridge team today.




  1. http://agewave.com/wp-content/uploads/2016/07/2014-ML-AW-Health-and-Retirement_Planning-for-the-Great-Unknown.pdf
  2. https://www.rbcwealthmanagement.com/_us/static/documents/insights/taking-control-of-health-care-in-retirement.pdf
  3. https://www.genworth.com/aging-and-you/finances/cost-of-care.html
  4. Source: 2010 NRMLA study.

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