Preparing for Healthcare and Long-Term Care Costs in Retirement

When most people imagine retirement, they picture freedom, flexibility, and finally having the time to focus on what matters most – family, travel, service, or long-delayed hobbies. But one concern often looms larger than most: healthcare costs.

As a retirement advisor, I’ve had countless conversations with clients who are worried about what would happen if their health declined. “What if I end up in a nursing home? Will I be able to afford it? How do I prepare financially for a long-term care event?”

These are legitimate fears. But with the right strategy, you don’t have to face them unprepared.

Understanding the Rising Costs of Healthcare in Retirement

Healthcare inflation continues to outpace general inflation, making everything from prescriptions to long-term care more expensive each year. According to the Department of Health and Human Services, roughly 70% of adults over 65 will require some form of long-term care during their lifetime.

Too many retirees enter retirement with plans that don’t grow with inflation. If your income doesn’t adjust for rising costs, it simply won’t last. That’s why a forward-thinking financial strategy is critical.

How the Perennial Income Model™ Helps You Plan for Healthcare Expenses

At Peterson Wealth Advisors, we use a proprietary planning approach called the Perennial Income Model™. It segments your retirement assets into different time-based portfolios, each designed for a distinct stage of retirement. One of the most important (and often overlooked) segments is the final one: what we call the “legacy segment.”

The Legacy segment is designed to preserve assets to act as a financial buffer. This buffer can help cover large, unexpected expenses like a long-term care stay or extended medical treatment. It’s part of a larger strategy to ensure:

• Predictable income early in retirement
• Growth in later years to outpace inflation
• A financial cushion for healthcare and emergencies

This approach offers peace of mind in a phase of life that can otherwise be filled with uncertainty.

Coordinating Healthcare, Medicare, and Taxes

Planning for healthcare doesn’t happen in isolation. One of the most misunderstood facts about Medicare is that your premiums are directly tied to your taxable income. Take too much out of your IRA or retirement accounts in one year, and you could bump yourself into a higher Medicare bracket, meaning you could be paying significantly more for coverage.

This is why retirement planning must include a tax strategy. At Peterson Wealth, we coordinate investment, tax, and income planning to help our clients avoid these hidden costs and make informed decisions that support long-term financial health.

Medicare Alone Won’t Cover It All

Many people assume Medicare covers long-term care. This is not the case. Understanding what Medicare does and does not cover is essential. That’s why we help clients navigate questions like:

• When should I enroll in Medicare?
• Should I choose a Medigap or Medicare Advantage plan?
• How do my withdrawals affect my premiums?

Without this level of coordination, it’s easy to overlook opportunities or incur unnecessary expenses.

Should You Buy Long-Term Care Insurance?

This is a common conversation I have with clients. Most people know that 70% of retirees will need some form of long-term care, but they often underestimate the duration and cost.

While long-term care insurance can be a good fit for some, premiums can be expensive, especially if you wait too long to apply. For many of our clients, the preferred option is self-insuring by reserving a portion of their assets within the legacy segment of their Perennial Income Model™.

It’s not about fear, it’s about preparation. Having a strategy gives you choices, and choices are empowering.

Your Health and Your Wealth Protected

Healthcare costs will continue to rise, but they don’t have to derail your retirement. By building a plan that includes income segmentation, inflation protection, tax coordination, and a healthcare reserve, you can face the future with confidence.

That’s what the Perennial Income Model™ is all about. When we plan well today, you won’t have to worry about tomorrow. You’ll be free to focus on what really matters—living well, giving back, and enjoying the retirement you’ve earned.

 

Let’s make sure your retirement plan supports your health and your peace of mind. Schedule a consultation with a Peterson Wealth Advisor at petersonwealth.com.