Saving enough for retirement is a serious worry for millions of Americans planning for their future. According to recent LIMRA research1, over 60% of retirees and pre-retirees cite rising health care costs as their top perceived threat to retirement security.
In fact, they have reason for concern. Here’s a closer look at the health care expense shock retirees are experiencing and some ways retirees and pre-retirees can prepare for these expenses:
Inflation is driving health care costs at an increasing rate. Data from the HealthView Services 2026 Retirement Health Care Costs Report2 projects the national average lifetime premium costs for a healthy 65-year old couple retiring in 2026 (with Original Medicare -- Parts A, B, D and Medigap) to be $688,996. When deductibles, copays, hearing, vision, and dental are added, total costs increase to $955,411. The current 5.8% health care inflation rate outpaces the 2.4% Social Security COLA (cost of living adjustment) by more than 2x. If inflation persists at its current pace, a couple age 65 in 2026 will spend 84% of their social security benefits on healthcare, and a 55-year old couple can expect to spend 104% of these benefits. Since retirees now and in the future will need to put the majority if not all of their social security benefits towards basic health care costs, non-routine health care events or procedures could end up coming out of retirement savings.
LIMRA reports3 76% of American adults currently have a chronic health condition (e.g. obesity, diabetes, hypertension), and 50% live with two or more. People are also living longer, and the risks of developing chronic health conditions, cancer, heart disease, and dementia get higher with age. 69% of Americans 65+ are projected to require multiple years of long-term care, a cost that Medicare doesn’t cover.
Pre-retireess and retirees' concern about rising health care costs rooted in real conditions -- a situation that requires investment and savings planning.
For many Americans preparing for retirement or already enjoying their retirement years, making financial decisions that will increase income or savings along with lifestyle decisions that prevent serious health concerns during retirement needs to be a top priority.
Choosing when to retire can help mitigate some of the financial burden of health care expenses during retirement. Those who delay retirement beyond full retirement age can keep earning money to increase their savings and potentially increase their Social Security Income at a later date. Some may even be able to extend employee benefits, including health care coverage, which can take care of some bigger medical bills with minimal out-of-pocket liabilities.
Maintaining a healthy lifestyle is paramount before and during retirement. Healthier individuals will not only live longer but may be better able to ward off a number of diseases and illnesses that could warrant extra trips to the doctor and expensive hospital stays. Being proactive about maintaining a healthy lifestyle could be one way to offset rising health care costs during retirement while enjoying a better quality of life.
Investing in annuities can be another way to protect retirement savings and offset health care costs throughout retirement. There are no limits on the amount an individual can invest in annuities and all earnings are tax-deferred until withdrawals begin. (Carriers may place a limit on the amount that can be invested into a single contract.)
Annuity contracts typically allow for penalty-free withdrawals of up to 10% of the contract value during the surrender charge period. Such withdrawals could be useful for covering emergency health care expenses.
Even though health care costs are on the rise, retirees and pre-retirees have several options for protecting against overwhelming expenses during retirement. Educating themselves about the concept of health care expense shock and predicting potential health care expenses can help more individuals make important financial decisions well before medical bills start piling up.
Sources:
¹ LIMRA Secure Retirement Institute: Health-Related Costs are the Greatest Threat to Retirement Security,2026; New Research Finds The Growing Influence of Health Risks on Retirement Security.pdf
² HealthView Services 2026 Retirement Health Care Costs Report
³ LIMRA Secure Retirement Institute: Health-Related Costs are the Greatest Threat to Retirement Security,2026; New Research Finds The Growing Influence of Health Risks on Retirement Security.pdf
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