2025 is off to a tumultuous start, between changes to Medicare and stock market fluctuations, both with implications for seniors in retirement.

Our 2024 survey with eHealth showed that the number one anxiety our clients face in retirement are anticipated and unexpected healthcare costs, with 63% citing it as their top concern. The best way to alleviate these fears is to work with a financial advisor to incorporate health care costs into your retirement income plan and adjust these costs accordingly to provide a long-term outlook on how these expenses will impact your income and savings as you age.

Healthcare costs can be one of the largest expenses in retirement, with recent estimates showing an average retired couple at 65 may need roughly $330,000 [1] to cover healthcare costs through retirement. Typically, these costs will become more prevalent later in life because, as we age, our healthcare needs often increase while other expenses may decrease. Knowing how these expenses evolve over time can help better position a retirement income plan for long-term success.

As you transition into retirement, it's crucial to build a strong financial foundation for healthcare. Consider setting aside 6-12 months of emergency savings specifically for unexpected medical costs. This will be a cushion for when large, variable healthcare expenses happen suddenly and will lessen strain on your normal month-to-month income streams like social security, pensions, or withdrawals from investments. These savings should be kept in an accessible, liquid account like a high-yield savings account.

If you're retiring before 65, you'll need to budget for private health insurance until Medicare eligibility. And if you're still working, don't forget to maximize those HSA contributions—they offer triple tax advantages that can significantly benefit your retirement healthcare budget. If you’re retiring after age 65, work with eHealth to select a Medicare option that takes into account your preferred providers and covers vital prescriptions. Make sure to ask about your maximum out of pocket costs to help with your retirement income budget.

Now that you're on Medicare, take time to really understand what it covers—and perhaps more importantly, what it doesn't. Many people are surprised to learn that routine dental, vision care, and most long-term care needs aren't covered. During this decade, creating a flexible budget becomes essential as healthcare needs typically evolve. Consider implementing a dynamic withdrawal strategy from your retirement accounts that can adjust for healthcare inflation, which often outpaces general inflation. If possible, continue maintaining a substantial emergency savings for healthcare expenses into your 70s to have a buffer. The bigger the buffer, the more confidence you'll have when the unexpected happens.

Long-term care becomes a more pressing concern in this decade, so having a plan is essential. Medicare typically doesn't cover these expenses, which can be substantial. Review your budget and income plan regularly as healthcare priorities often shift dramatically during this period. Many retirees find that home equity becomes an important potential resource later in life. Understanding options like reverse mortgages (using your home equity for income while staying in your home) or downsizing might provide additional funds if needed for increasing healthcare expenses while staying in your home with supportive care. Working with a dedicated advisor who knows your financial plan and needs will help you determine what options make the most sense for you at this stage in your life.

Taking control of your healthcare costs during retirement is essential for financial security. Retirable can help you build a resilient spending plan that accounts for healthcare inflation while protecting your retirement nest egg.

Retirable offers free personalized retirement planning through eHealth's ePerks, providing expert financial guidance to help eHealth customers manage healthcare costs and other retirement expenses. As an ePerks member, you are entitled to schedule your free consultation today and meet with a fiduciary retirement advisor for free!