Medical Expense Planning Philosophy for Clients Retiring at Age 60
As clients approach retirement, one of the most significant financial concerns is healthcare costs. For those retiring before Medicare eligibility at age 65, it’s crucial to plan for both pre-Medicare and post-Medicare expenses while considering inflation, healthcare utilization, and risk management strategies.
Phase 1: Pre-Medicare (Ages 60–64)
Since clients won’t yet be eligible for Medicare, they must secure private insurance through the ACA Marketplace, COBRA, a spouse’s plan, or retiree health benefits.
Estimated Annual Budget: $10,000–$20,000/year
Health Insurance Premiums (Major Expense)
ACA Marketplace: $800–$1,200/month ($9,600–$14,400/year)
COBRA: $700–$1,500/month ($8,400–$18,000/year) (lasts up to 18 months)
Spouse’s employer plan: Variable, but often $5,000–$12,000/year
Deductibles & Out-of-Pocket Costs
$2,000–$6,000/year (depends on plan and usage)
Dental, Vision, and Hearing
$1,500–$3,000/year for routine care and occasional major services
Prescription Drug Costs
$600–$1,500/year, depending on medications
Unexpected Medical Expenses
Budget $1,000–$3,000/year as a buffer
Total Pre-Medicare Annual Budget: $10,000–$20,000/year
💡 Planning Tip: We encourage clients to build a dedicated Healthcare Bridge Fund of $50,000–$100,000 to cover these five years. We recommend holding these funds in an HSA or Roth account, both of which offer tax-free growth and distribution flexibility. Keeping a portion of these assets in equities provides an aggressive hedge against inflation.
Phase 2: Post-Medicare (Age 65+)
Once clients become eligible for Medicare, healthcare costs generally decrease, but out-of-pocket expenses remain.
Estimated Annual Budget: $7,500–$12,000/year
Fixed Monthly Premiums
Medicare Part B: ~$185/month ($2,220/year)
Medigap Plan G (or equivalent): ~$217/month ($2,604/year)
Medicare Part D: ~$60/month ($720/year)
Total Premiums: $5,500–$6,000/year
Deductibles & Coinsurance
Medicare Part B Deductible: $250/year
Out-of-pocket costs: $500–$1,500/year
Dental, Vision, and Hearing
$1,500–$3,000/year
Prescription Drugs
$600–$1,500/year
Long-Term Care Planning
If self-insuring, budget $3,000–$5,000/year for future care
Unexpected Medical Expenses
Budget $1,000–$3,000/year
Total Medicare-Age Annual Budget: $7,500–$12,000/year
💡 Planning Tip: We encourage clients to save $250,000–$350,000 for healthcare costs in retirement. A combination of Roth accounts and taxable investment accounts can provide flexibility in covering these expenses while minimizing taxes. Fidelity estimates a 65-year-old couple will need $315,000 for medical expenses throughout retirement.
Final Summary: Retirement Medical Budgeting
Implementation for Client Planning
This framework should be used as part of a comprehensive retirement strategy, ensuring clients have a sustainable plan for medical expenses. We recommend discussing tax-efficient withdrawal strategies, HSAs, Roth conversions, and long-term care options to optimize their healthcare funding strategy.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by GW Financial, Inc. to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2025 GW Financial, Inc.
Sources and Data Considerations
ACA Marketplace Premium Estimates: MoneyGeek (2024 Data)
Medicare Premium Projections: MarketWatch (2025 Part B Estimate)
Long-Term Healthcare Cost Estimates: Fidelity’s Retiree Health Care Cost Estimate (2024)
Medigap & Prescription Drug Data: Kaiser Family Foundation (KFF), CMS Reports
