Continuing our Plan for Retirement series, we take a closer look at Healthcare in retirement and the decisions that help shape it.
Healthcare costs can be one of the more unpredictable parts of a retirement plan. Medicare eligibility, the years before Medicare begins, and the possibility of needing long-term care each come with choices and tradeoffs worth understanding well before they arrive. Building a plan around these three pieces now can help protect a retirement plan later.
Medicare
For most, Medicare eligibility begins at age 65. Part A covers hospital care and is generally premium-free for those who paid Medicare taxes during their working years. Part B covers outpatient care, physician visits, and preventive services, and it carries a monthly premium that increases with income. Part D covers prescription drugs and is offered through private insurers.
Medicare does not cover dental care, vision care, hearing aids, or long-term custodial care. It also carries deductibles, copayments, and coinsurance. Many retirees choose either Original Medicare with supplemental coverage such as Medigap, or a Medicare Advantage plan. The choice can affect both costs and flexibility for years to come.
Enrollment timing matters as well. Missing the initial enrollment window around a 65th birthday can result in late enrollment penalties that may continue for as long as you have Medicare, so this is a decision that benefits from advance planning rather than a last-minute review.
The Pre-65 Coverage Gap
A growing number of people retire before age 65, whether by choice or circumstance. This creates a gap of one or more years without employer coverage and without Medicare eligibility. This is one of the most underestimated costs in retirement planning.
Options during this gap generally include COBRA continuation coverage, a spouse’s employer plan, or a policy purchased through the health insurance marketplace under the Affordable Care Act. Each option carries a different cost, and marketplace premiums vary based on income, which means the timing of retirement account withdrawals can directly affect how much a retiree pays for health coverage. A retiree who plans withdrawals with this in mind may qualify for a subsidy that lowers premiums meaningfully.
Anyone considering retirement before 65 should build the cost of this gap into their plan well before their last day of work, rather than discovering it afterward.
Long-Term Care
Long-term care includes assistance with daily activities such as bathing, dressing, and mobility, and it may be needed in a home setting, an assisted living facility, or a nursing home. A plan built in advance determines who chooses the setting and quality of that care. A plan built in the moment often defaults to whatever is easiest to arrange or more affordable.
Options include long-term care insurance, hybrid life insurance or annuity policies with long-term care riders, and a dedicated pool of assets set aside specifically for care rather than blended into the broader portfolio. Each approach preserves choice and protects the estate differently, and the most efficient path is not always the one with the lowest premium or the smallest upfront cost.
The right approach also depends on how long-term care fits alongside the estate plan, trust structure, or business succession plan already in place, which makes this a conversation best had together with those decisions rather than apart from them.
Building Healthcare into the Plan
A retirement plan is only complete once healthcare has a plan of its own. Medicare, the coverage gap before 65, and long-term care each deserve their own conversation as part of a complete retirement plan. At Gryphon Financial Partners, we work with clients to plan for these costs alongside income, tax, and investment decisions, because helping make people’s lives better means preparing for the full picture of retirement, not just the parts that are easiest to predict.
If healthcare costs are not yet part of your retirement plan, now is a good time to start that conversation.
Disclosure
This material is provided by Gryphon Financial Partners, LLC (“Gryphon”) for informational purposes only. It is not intended as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Facts presented have been obtained from sources believed to be reliable, though Gryphon cannot guarantee their accuracy or completeness. Gryphon does not provide tax, accounting, or legal advice. Individuals should seek such guidance from qualified professionals based on their specific circumstances.