How to Handle Rising Healthcare Costs in Retirement (Without Sacrificing Your Care)

If you’re getting close to retirement, there’s one big expense that catches almost everyone off guard. That expense is healthcare.

Even with Medicare, you could easily spend hundreds of thousands of dollars over your retirement. But here’s the good news: you don’t have to sacrifice great care just to keep costs down.

Let’s walk through how to plan ahead and manage those healthcare costs wisely, so those surprise bills don’t ruin your peace of mind or your retirement experience.

The Truth About Medicare: It’s Not “Set It and Forget It”

Most people assume once they turn 65, Medicare will handle everything. Rainbows, Skittles, and smooth sailing. Right?

Not quite.

The reality is that even with Medicare, you’re likely to spend somewhere between $200,000 (single) to $400,000 (couple) on healthcare during retirement. That includes things like:

Monthly premiums
Copays and deductibles
Prescription drugs
Dental, vision, and hearing (which aren’t fully covered)
Long-term care (which isn’t covered at all)

If you’re not careful, those bills start adding up. Fast.

Understanding IRMAA: How Income Impacts Your Medicare Premiums

Here’s where many folks get blindsided. By something called IRMAA: Income Related Monthly Adjustment Amount.

In 2025, the base Medicare Part B premium is $185/month. If your income is below $106,000 (single) or $212,000 (married), that’s all you pay.

But if you make just one dollar over that line, IRMAA kicks in—and suddenly, you’re paying $74 more each month. It continues to increase the more income you show on paper… up to $628.90/month if your income crosses $500K.

And remember, Medicare uses a two-year lookback on your tax return. So the choices you make today can affect your premiums two years from now.

And that’s not just for Part B, your Medicare Part D (drug coverage) has its own IRMAA adjustments too.

Don’t Miss the Enrollment Window (Or It’ll Cost You for Life)

Timing matters.

If you don’t enroll in Medicare during your 7-month window (3 months before your 65th birthday, your birthday month, and 3 months after), you could get hit with lifetime penalties.

For Part B, the penalty is 10% of the premium per year you delay.

Example: If you waited 2 years, you’d owe 20% more for life. That’s $222/month instead of $185/month.

Same deal for Part D (drug coverage). 1% penalty for each month you’re late.

Doesn’t seem like much at first glance. But remember, these extra fees follow you for the rest of your retirement.

The Long-Term Care Gap: Why It’s the Most Overlooked Expense

Let’s talk about what Medicare doesn’t cover long-term care.

Seven out of ten people over age 65 will need some type of long-term care. On average, retirees need care for three years and that doesn’t always mean a nursing home. It could be:

A home health aide a few times a week
Assisted living
Full-time nursing care

These services run about $50K–$60K per year. That’s another $150,000–$200,000 not accounted for in most retirement plans.

And here’s the kicker… Medicare won’t pay for it.

So now we’ve got our basic care costs plus long-term care, and suddenly that retirement nest egg is looking a little small.

Five Smart Ways to Lower Costs Without Sacrificing Care

Now that you understand the problem, let’s talk about solutions.

Here are five ways you can take control of your healthcare costs in retirement—without cutting corners on your care.

1. Use Tax-Free Accounts for Medical Expenses

Roth IRAs and Health Savings Accounts (HSAs) are your best friends here.

Withdrawals from these accounts don’t count toward your IRMAA income limits and they’re not taxable. That means you won’t push yourself into a higher bracket by covering a $10,000 surgery.

Roth IRA: Tax-free growth and withdrawals. Doesn’t impact IRMAA.
HSA: Triple tax benefit… deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.

If you’re still working and eligible for an HSA, take advantage of it now. That’s tax-free money your future self will thank you for.

2. Choose the Right Medigap Plan (Especially Plan G)

Medigap plans help cover the “gaps” that Medicare doesn’t. And Plan G is the most popular for a reason.

It covers almost everything, except the Part B deductible, but offers strong protection from out-of-pocket surprises.

Plan F used to be the gold standard, but it’s no longer available to new enrollees.

Plan N is a cheaper option, but it doesn’t cover excess charges. That means if your doctor bills more than Medicare’s standard rate, you pay the difference.

Bottom line: Plan G offers the most comprehensive protection for the price.

3. Review Your Part D Plan Every Year

Don’t just set your prescription drug plan and forget it.

Each year, formularies (the list of covered drugs), premiums, and copays can change. Your needs will change too.

During Medicare’s open enrollment, compare plans using the Medicare.gov tool. You might find a better deal that covers your current medications more affordably.

4. Plan Ahead for Long-Term Care

You’ve got three choices here:

Self-fund – Set aside $200,000 or more
Buy insurance – Shop for long-term care coverage in your 50s, when premiums are more affordable and you’re more likely to qualify
Plan for Medicaid – A 10-year strategy that requires proper asset alignment and legal planning

Some couples explore shared coverage riders, where one spouse can use the other’s unused benefit. That flexibility can make a big difference, especially if one partner needs care while the other doesn’t.

But remember, these are conversations to start early. Not at age 64.

5. Coordinate Your Income and Withdrawal Strategy

This is where it all comes together: your taxes, premiums, and income flow.

The goal is to have a mix of income sources that:

Provide flexibility
Keep you below IRMAA thresholds
Allow your investments time to recover during market downturns

This is why I love the three-bucket strategy:

Taxable bucket: CDs, money markets, bonds
Tax-deferred bucket: 401(k)s, traditional IRAs
Tax-free bucket: Roth IRAs, HSAs

When the market is down, you can draw from safer buckets without locking in losses. That gives your investments time to rebound and protects your retirement lifestyle.

Final Thoughts: Don’t Let Healthcare Wreck Your Retirement

Healthcare is one of the top three expenses in retirement, but most people treat it like an afterthought.

That’s a mistake.

You don’t need to gamble with your care, go without insurance, or ignore long-term care planning. But you do need to be strategic.

That’s why I created the Healthcare Cost Blueprint. It walks you through:

What Medicare actually covers
Real pricing examples
Five ways to cut costs (without cutting quality)

Until next time, Wisdom Over Worry

Dre Griggs

P.S. – Click the link below to grab your free guide and take the first step toward a retirement that’s worry-free and well-planned.

👉 Download the Healthcare Cost Blueprint

If you’re ready to build out a retirement plan that includes all the pieces. Income, taxes, healthcare, and legacy… I’d love to help. Click here to schedule a free consultation and let’s start planning your Wealthy Retirement today.

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