Medicare
Medicare
Medicare—the federal health insurance program for most Americans age 65 and older—plays a central role in retirement healthcare planning. Original Medicare includes Part A for hospital care and Part B for doctor visits and outpatient services, while Part D helps cover prescription drugs.
Because healthcare costs can rise significantly over a long retirement, understanding Medicare early is essential to building a realistic financial plan. Enrollment timing matters: Missing initial enrollment windows can lead to permanent premium penalties and gaps in coverage. And keep in mind that higher-income retirees may also pay more for Parts B and D through income-related surcharges.
Medigap
Medigap
While original Medicare provides a strong foundation of healthcare coverage in retirement, it was never designed to pay all medical expenses. Deductibles, copayments and coinsurance can add up over time, particularly for those who expect to use healthcare services frequently. This is where Medicare Supplement Insurance—commonly known as Medigap—can play an important role.
Medigap policies are offered by private insurers and are designed specifically to cover many of the out-of-pocket costs that Original Medicare doesn’t pay. Depending on the plan selected, coverage may include hospital deductibles, skilled nursing coinsurance, physician copayments and emergency care while traveling abroad.
One of the primary advantages of Medigap is predictability. Retirees who value budgeting stability often appreciate knowing that most routine medical costs will be covered after paying a monthly premium. Medigap policies also allow beneficiaries to see any provider nationwide who accepts Medicare, without needing referrals or staying within a network—an important consideration for those who travel frequently or maintain residences in multiple states.
It’s also important to understand what Medigap does not cover. These policies don’t include prescription drug benefits, and they generally do not pay for dental, vision, hearing or long-term custodial care. As a result, Medigap should be viewed as one component of a broader healthcare strategy.
Long-term care
Long-term care
In addition to establishing a Medicare strategy, it’s important to consider healthcare needs that neither Medicare nor Medigap fully address—especially long-term care. This can include help with daily living activities provided at home, in an assisted living community or in a skilled nursing facility. Because Medicare and most traditional health insurance plans typically offer only limited coverage for these services, many retirees may face substantial out-of-pocket expenses. In 2024, average annual costs approached $78,000 for in-home care and exceeded $127,000 for a private room in a nursing home, making long-term care one of the most significant financial risks in retirement.
There are several ways to prepare for these potential costs. Some people choose to self-fund, using personal savings and investment assets to cover future care needs. This approach can work well for those with sufficient resources, but it requires careful planning around taxes, withdrawal strategies and the possibility of drawing from investments during a market downturn.
Others look to long-term care insurance for added protection and flexibility. Traditional policies provide coverage through ongoing premiums but may offer no return if benefits are never used. Hybrid options that combine life insurance with long-term care benefits can provide value to heirs even if care is never needed, while annuity-based or linked-benefit products offer greater liquidity and may allow policyholders to recover part of their investment.
Working with a financial advisor can help you evaluate long-term care options—whether you’re self-insuring or purchasing a long-term care policy—to determine what’s most appropriate for your broader retirement plan and lifestyle goals.
Your advisor also can help weigh how to handle the unexpected: “Sometimes, it’s not your own health care but care for a family member that unexpectedly requires money, time and effort,” Bartick says. “There are always wild cards in the planning process.” While you can’t necessarily avoid those wild cards, a thoughtful plan will help protect against many of the key health care spending risks faced by retirees.
