INSIGHTS

Many pre-retirees with significant investable assets who reside in Houston are increasingly concerned about managing healthcare costs as retirement approaches. With medical expenses expected to be one of their largest retirement expenses, it’s important to incorporate healthcare planning into a broader financial strategy.
Why is healthcare emerging as a major component when you plan for retirement?
- One answer is longevity. A 65-year-old couple in good health has more than a 75% probability that one of the spouses will live to be over 90. So, income and assets may need to last 30 years.
- The other reason is the rapidly rising cost of healthcare for Assisted Living, Skilled Nursing, and Memory Care. One or both spouses may require one or more of these services late in life.
At Precedent Wealth Partners, we can help you navigate planning for these complex decisions by offering personalized guidance from a fiduciary financial advisor in Houston.
In this article, we’ll look at three healthcare planning issues you should factor into your retirement planning strategy. We’ll also suggest some actionable solutions to ensure your retirement plan includes specific strategies associated with healthcare consequences that impact planning and spending.
1. Rising Healthcare Costs in Retirement
One of the biggest concerns for retirees is the unpredictability of healthcare costs. Studies show that a 65-year-old couple retiring today may need upwards of $300,000 for healthcare expenses throughout retirement. This staggering number often doesn’t include long-term care, which can be another significant cost late in life.
Solution: Start a Healthcare Fund
Creating a dedicated healthcare fund as part of your overall retirement plan is essential to reduce the uncertainty of rising healthcare costs. Strategies include:
- Maximizing Health Savings Accounts (HSAs): An HSA is a powerful tool for building a healthcare reserve if you are currently using a high-deductible health plan. Contributions are tax-deductible, while withdrawals for qualified medical expenses are tax-free. That is double tax leverage! Investing these funds for growth during your working years can create a significant cushion for future medical costs.
- Incorporating Healthcare Expenses into Your Retirement Income Strategy: As a fee-only financial planner in Houston, Precedent Wealth Partners can assist you with estimating future healthcare costs and then building them into your retirement income and withdrawal strategy. Planning for these costs upfront can reduce the risk of depleting your savings later in life.
- Medicare Optimization: Understanding the nuances of Medicare is critical to making informed decisions. Enrollment timing, supplemental plans, and prescription drug coverage options can all impact your overall costs. Consulting with a financial planner who understands Medicare can ensure you choose the right coverages.
Watch our co-founder, Harold Williams, discuss how to build a sustainable retirement income stream.
2. Long-Term Care Expenses
Long-term care (LTC) is another pressing issue for retirees, as the need for assistance with daily activities can arise unexpectedly. Costs for long-term care, whether in-home, assisted living, or nursing home care, can be quite expensive and, thus, quickly deplete your retirement savings if you haven’t planned for this expense.
Solution: Strategic Long-Term Care Planning
There are several approaches to planning for long-term care, each with its benefits and trade-offs:
- Long-Term Care Insurance: Traditional LTC insurance policies can help cover the cost of care, but premiums can be expensive, and not all retirees qualify for coverage. Hybrid policies combining life insurance with long-term care benefits are becoming more popular in recent years and may offer a solution for those concerned about legacy planning and healthcare costs.
- Self-Funding with a Dedicated Account: Some retirees prefer to self-fund long-term care expenses by earmarking a portion of their assets specifically for this purpose. If you choose this route, working with a fiduciary financial advisor in Houston is crucial to ensure your investments are positioned for growth and accessibility when the funds are needed.
- Medicare Gaps and Supplemental Insurance Medicare provides essential healthcare coverage, but it doesn’t cover everything. Original Medicare (Parts A and B) leaves gaps in coverage, particularly regarding dental, vision, hearing, and extended hospital stays. These gaps can lead to unexpected out-of-pocket costs that strain your retirement budget.
Solution: Supplementing Medicare Wisely
To fill in the gaps left by Medicare, consider the following options:
- Medigap Plans: Medigap (or Medicare Supplement) policies help cover out-of-pocket costs not covered by Original Medicare, such as copayments, coinsurance, and deductibles. With multiple options available, choosing a plan that aligns with your healthcare needs and budget is important. A financial planner in Houston, TX, can help you evaluate your options and make the right decisions.
- Medicare Advantage Plans: Alternatively, Medicare Advantage (Part C) plans bundle Medicare Parts A, B, and often Part D (prescription drug coverage) into one plan, with additional benefits like dental, vision, and hearing coverage. Private insurers provide these plans, and coverage and costs vary widely. Careful comparison shopping is essential to ensure your chosen plan meets your needs without breaking your budget.
- Regularly Reviewing Your Plan: Medicare and supplemental insurance plans change annually, so it’s crucial to review your coverage regularly. At Precedent Wealth Partners, we help you stay on top of these changes to ensure your healthcare coverage always aligns with your needs.
Why Precedent Wealth Partners?
Healthcare costs can be a significant unknown in retirement and, therefore, a substantial risk, but with the right planning, you can reduce the financial impact of these risks. At Precedent Wealth Partners, we specialize in helping pre-retirees with $500K or more in investable assets create financial plans that address healthcare concerns while building a sustainable retirement plan that includes financial security later in life.
As a financial fiduciary firm in Houston, TX, we always prioritize your best interests, ensuring you receive objective, personalized advice. Our unique WillShare program is designed so that we treat you like our firm’s fellow owner. Through this innovative approach, if after-tax profits are distributed to Precedent’s owners, you may receive fee credits that reduce the cost of your wealth management. This structure aligns our goals with yours, motivating us to deliver exceptional service and foster sustainable growth that benefits you and the firm.
Ready to learn more about our wealth management services? Connect with us today.