Medicare may provide a welcome foundation for healthcare, but a significant layer of costs still falls to the retiree. Over the years of helping clients carefully plan for their financial future, we’ve found healthcare costs are consistently the biggest unknown in retirement — specifically the areas Medicare leaves uncovered.
Being aware of these gaps can help you plan ahead and avoid unwelcome surprises. In this article, we’re addressing three areas of healthcare you need to consider before transitioning to Medicare:
- Prescription Drugs
- Long-Term Care & Assisted Living
- Dental, Vision, & Hearing
High Costs for Specialty Medications
Prescription drug costs — especially specialty medications — can be high enough that they must be budgeted for.
Even with Medicare Part D, retirees can be surprised by coverage gaps. High-dollar medications fall into a “specialty tier,” where instead of a flat copay of a few dollars (as you might expect with a blood pressure prescription), you may be required to pay a percentage of the drug’s total cost.
For example, if a specialty tier medication costs $5,000 per month and your coinsurance is 25%, you would be paying $1,250 each month. While this situation isn’t common, it’s important to review your prescriptions carefully if you rely on specialized or high-cost medications.
On average, Medicare recipients can expect to spend around $3,000 annually on out-of-pocket healthcare expenses. But those costs can escalate quickly if specialty drugs are part of your routine.
Long-Term Care & Assisted Living
Medicare covers skilled nursing or rehabilitation temporarily, but it does not cover ongoing custodial care. Assisted living facilities, in-home care aides, or nursing homes typically fall outside Medicare’s scope because they are considered non-skilled care.
This is significant: the majority of retirees will need some form of long-term care during their lifetime. That reality makes it one of the largest and easily overlooked retirement expenses.
According to the Federal Long Term Care Insurance Program, here are the current daily costs in our region compared to national averages:
- Philadelphia, PA/Wilmington, DE Region
- $180/day for home health care
- $228/day for assisted living centers
- $402/day for nursing home care
- $180/day for home health care
- National Average
- $162/day for home health care
- $159/day for assisted living centers
- $276/day for nursing home care
- $162/day for home health care
The same resource predicts these costs could increase by roughly 25% by 2035. That means six months of home health care could exceed $32,000, while one year in assisted living might reach $83,000.
A realistic approach to planning is key. Consider your family health history, discuss potential care needs with loved ones, budget for the possibility, and review insurance or long-term care coverage options that may help offset the costs.
Dental, Vision, and Hearing
Routine dental checkups, dentures, eyeglasses, and hearing aids are often excluded from traditional Medicare. While there are outlier circumstances where bits and pieces of these areas receive some coverage, expect most of the cost to be out of pocket if relying on Medicare alone. While these may seem like everyday healthcare needs rather than catastrophic events, the expenses can add up significantly over 20–30 years of retirement.
For many retirees, thousands of dollars are spent out-of-pocket on crowns, implants, prescription lenses, or hearing aids. Building these costs into your retirement plan helps ensure they don’t come as a surprise later on. This concept isn’t new as your traditional health insurance also didn’t cover much in these areas without superior coverage or added policies. It’s often worth a look into holding extra coverage in these areas if they’re services you’ll know you’ll need in retirement.
Preparing for What Medicare Doesn’t Cover
Medicare provides a foundation, but it does not eliminate the need to prepare for healthcare expenses in retirement. Prescription medications, long-term care, and routine dental, vision, and hearing needs can all carry hefty price tags if left unplanned.
By acknowledging these gaps now, you can take steps to put strategies in place — whether through savings, insurance policies, or family planning discussions. A thoughtful plan ensures you can focus less on surprise costs and more on enjoying your retirement years with peace of mind.
About Foundation Wealth Management
Foundation Wealth Management is a CPA-led organization, that provides financial planning services and tax planning support; services and outcomes vary based on each client’s circumstances. Our team includes qualified professionals, such as CPAs and CFP®s, who are integral to our service offerings. Our team includes 3 Certified Financial Planners: Burt Hutchinson, CPA, CFP®, Paul LaViola, CFP®, and Stephen McDade, CFP®.
As Fee-Only planners, we are compensated directly by clients rather than through commissions from brokerage or insurance products, which we believe helps align our services with client goals.
- https://www.medicare.gov/health-drug-plans/part-d/what-drug-plans-cover/how-drug-plans-work
- https://www.commonwealthfund.org/publications/issue-briefs/2017/may/medicare-beneficiaries-high-out-pocket-costs-cost-burdens-income
- https://www.ltcfeds.gov/tools/cost-of-care
Disclosure Statement:
This presentation is not an offer or a solicitation to buy or sell securities. The information contained in this presentation has been compiled from third-party sources and is believed to be reliable; however, its accuracy is not guaranteed and should not be relied upon in any way whatsoever. This presentation may not be construed as investment, tax, or legal advice and does not give investment recommendations. Any opinion included in this report constitutes our judgment as of the date of this report and is subject to change without notice. All investments are subject to risk, including the possible loss of principal.
The client scenarios presented in this blog are entirely fictional and created solely for illustrative purposes. Any similarities to actual persons, entities, or events are purely coincidental and unintentional.
Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website, Past performance is not a guarantee of future results.
