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We all need money management advice, whether you’re an experienced investor or a young adult trying to purchase your first home. MassMutual’s team is here to help.
Today’s insights on planning for health care expenses in retirement come from Lisa Frankovich, a financial professional with GoldBook Financial in Scottsdale, Arizona.
Q: Health care is an unknown variable in retirement planning and often one of the biggest expenses we face as we age. How do you advise clients to plan for that?
A: This issue hits very close to home for me as my father recently underwent surgery. Following that surgery he had to have three more surgeries due to complications, which made him very weak and unable to walk or even get out of bed. Medicare covered him in rehab for only three weeks of skilled care, after which ongoing custodial care was not covered. When he got home, he needed around-the-clock caregivers at a cost of $1,000 a day. Luckily, my parents were good savers and had the money to cover this.
Health care and long-term care expenses have historically risen at around 6 percent per year, which is generally higher than overall inflation. You need to have a plan to pay for those expenses.
Some individuals have enough money that they can self-fund those expenses. For those with less saved, it is vital that they plan ahead.
Long-term care insurance options
Long-term care (LTC) insurance coverage is one way to plan for future long-term care expenses. But LTC insurance premiums can also increase over time as rates are not guaranteed to remain level, which can be difficult for retirees on a fixed income to absorb. If you can’t afford the premium increase, you could potentially choose to reduce your coverage or remove any inflation riders, which may reduce premiums but can also reduce future benefits. I encourage clients to reassess coverage if premiums increase and consider whether the policy continues to fit their needs and budget.
In addition to stand-alone LTC insurance, there are life insurance policies with optional long-term care riders or hybrid life insurance policies available. These policies may provide benefits for qualified long-term care expenses during your lifetime and, if you don’t use all your long-term care benefits, any remaining death benefit may be paid to your beneficiaries after you pass away; however, this is subject to the terms, conditions, and structure of the policy.1
Using investments to help pay for future health care costs
On the health care cost perspective, premiums for Medicare Part B, which covers outpatient services like doctor visits, preventive care, lab tests, mental health, and durable medical equipment, have increased 67 percent in the last 10 years.2 Annual deductibles have also increased substantially.
I often discuss the role of maintaining a percentage of their money in the stock market, even during retirement, as one way to help keep pace with rising health care costs. That percentage will depend on their age, assets, and spending needs. If they keep assets primarily in low-interest savings, purchasing power may decline over time because of inflation, while stock market investments involve market risk and volatility. (Related: Why a balanced asset allocation isn’t one and done)
Also, if a client is self-funding their health care and future long-term care needs, they might consider reinvesting some of their required minimum distributions (RMDs) in a tax-managed investment account with the goal of managing tax liability and maintaining flexibility for future expenses. Like any investment approach, this comes with uncertainty and market ups and downs. (Learn more: What to do with your RMD? 5 possibilities)
I also discuss using distributions from qualified retirement accounts, such as a 401(k) or traditional IRA, to pay for LTC insurance coverage. One reason to consider this approach is that you may be able to deduct a portion of your qualified LTC premiums as a medical expense on your federal tax return, subject to IRS rules and limits. The rules for claiming that deduction are complicated, however, and depend on:
- The type of coverage you have.
- Your age.
- How much you spent on premiums relative to your adjusted gross income.
- Your employment status.3
Whole life insurance can potentially help you pay for medical expenses
The cash value from a whole life insurance policy can also potentially be used to help cover the cost of health insurance as you age. Whole life insurance is first and foremost designed to provide a guaranteed death benefit to your beneficiaries when you die. But over time, it also accumulates cash value, money that may be accessed through policy loans or withdrawals, to help supplement your retirement savings address a variety of expenses, which may include health-related costs.4 (Learn more: What are living benefits in a life insurance policy?)
I believe every family should have a plan for their medical and long-term care expenses. If they have a financial professional, they should talk with them about whether they are meeting their savings goals. And if they manage their own money, then they need to discuss with the rest of the family what their plan is. I emphasize “the whole family” because if you don’t let your children know what your plan for managing expenses is, how can they help if you become incapacitated or cognitively impaired?
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1 Riders are typically available for an additional cost. Learn more here.
2 New Horizons Insurance Marketing, “Medicare Costs vs. Inflation: A Decade of Data (2016–2026),” Dec. 1, 2025.
3 Internal Revenue Service, “Publication No. 502: Medical and Dental Expenses,” Sept. 19, 2026.
4 Access to cash values through borrowing or partial surrenders will reduce the policy's cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.
