Could You Spend $1 Million in Retirement for Healthcare?
According to HealthView Service’s 2026 Retirement Healthcare Costs Data Report, the answer is a resounding “YES”. That is one scary proposition for many. Consider a couple starting Medicare at age 65. Let us assume that one lives 20 years and the other 30 years. Just using today’s dollars for Medicare Part B and D along with a supplement for those in the lowest premium bracket the total lifetime cost is about $250,000 while it’s $678,000 for those in the top premium bracket and those numbers are just for the premium costs in today’s dollars.
What might happen in the future as premiums and healthcare costs increase? Ponder the following numbers: 1) healthcare costs increase at an average annualized rate of 5.8%; 2) general inflation increases by 2.4%; and 3) 2026 Part B and Medicare Advantage premiums increased by 9.75% while Social Security increased only by 2.8%. That means that an even bigger percentage of total income is devoted to healthcare year after year. Now back to our “average” couple retiring at age 65. The report says they are paying about $17,000 in 2026, but 20 years from now those same premiums and costs climb to about $55,500. All said, this is a major impediment to retiring earlier than might be healthy (pun intended) for many people.
401(k) Catch-Up and Roth Contribution
One of the most basic investment strategies for employees that have a retirement plan at work is to invest at least enough to get the matching amount paid by the employer or “free money.” In 2026, the maximum amount that you can put into a 401(k) is $24,500 if under the age of 50, but for those age 50 and above, you can put in an additional $8,000 in a “catch-up.”
Amazingly, only 5% of workers who are eligible to participate in the “catch-up” do so according to the Public Retirement Research Lab. Assuming a participant puts in the additional $8,000 for 15 years and gets a hypothetical return of 6% annually, they are forgoing additional retirement monies of about $197,380. Using the 4% rule, this ironically could produce an additional $8,000 in retirement income.
At the beginning of this year, however, there is an additional advantage for those who are eligible to participate and make over $150,000 as the catch-up contributions must go into a Roth account. This contribution is NOT tax deductible but grows tax-free. At first glance it may not appear to be a plus since you lose the deductibility. However, having it grow tax-free means that $8,000 of additional income is the equivalent of about $10,000 of additional taxable income in the 20% tax bracket. Further, by having a bucket with tax-free money, retirees may keep their taxable income down, potentially saving on taxes and Medicare premiums in the future.
While the catch-up contribution must go into a Roth account for those mentioned above, there is nothing that keeps others from having a portion or all of their money (except employer contributions) going into a Roth account. This is especially true for those employees who are likely in a low-income tax bracket in the early years of their career.
How Extended Longevity Affects Retirement
The CDC reported that average life expectancy for Americans rose to approximately 79 years in 2024. This represents a 2.6-year increase from 2021, when life expectancy declined during the height of the pandemic. The primary drivers behind this rebound include improvements in outcomes related to COVID-19 and a decline in drug overdose deaths. Importantly, these gains are unlikely to stop here. As advances in modern medicine, preventative care, and personal wellness continue, life expectancy is expected to rise even further. Living well into your 80s, and even your 90s, is no longer considered unusual. Over time, this longevity will become the new norm, much like the growing expectation of healthy saving and spending habits.
With rising life expectancy comes an increased financial risk of outliving your money. This makes saving early and consistently more important than ever. Beyond just building the habit of saving, taking advantage of compound interest over many years becomes critical to long-term financial security. Monitoring and managing spending are equally important. Planning ahead, whether on your own, with a partner, or with a financial advisor, can help you choose a withdrawal rate that meets your income needs while also helping your portfolio potentially last longer. Thoughtful planning helps ensure your money supports you throughout your life, providing greater stability and peace of mind in retirement.
Unpacking the Asset Classes: Alternative Investments
In this edition of Unpacking the Asset Classes, we will cover alternative investments, often referred to as “alts.” These investments span across a wide variety of assets outside of traditional ones like stocks and bonds, ranging from private equity to real estate and cryptocurrencies to collectibles. Typically, alts are considered riskier and less liquid investments, though they can have diversification benefits and higher return and income potential.
Alternative investments often behave differently than traditional market movements, helping to enhance a portfolio’s diversification. In periods of market turbulence, alts can potentially counterbalance the volatility in a portfolio and improve risk-adjusted returns. Some alts may even offer protection from inflation as goods and services become more expensive.
Because alts often exhibit low liquidity and trade in less active markets, investors might find it more difficult to sell them than traditional investments. For example, it’s much harder to sell a plot of sugarcane farmland than 1,000 shares of Coca-Cola (KO) due to the limited number of buyers.
Traditionally, many alternative investments were only available to institutional and accredited investors, but they have recently become more accessible to retail investors through mutual funds and ETFs. It’s important to note that some alts call for extra due diligence since they can be complex in nature, lack regulation, or have fee structures that can cut into returns.
In the end, investors turn to alternative investments for their perceived ability to reduce volatility and enhance returns within a traditional stock and bond portfolio. If you want to learn more about the major asset classes, look out for the last edition of Unpacking the Asset Classes on currencies.
Up Your Assets™ Podcast
Episode 26 -Trust Companies Explained: Preserve Family Wealth & Protect Your Legacy for Generations
In this episode of the Up Your Assets podcast, Ray Ferrara, CFP® and James A. Combs, Jr., the President and CEO of National Advisors Trust Company discuss the intricacies of legacy planning and the role of trust companies in estate planning. They explore the advantages of using a corporate trustee, the benefits of the directed trust model and the importance of professional expertise in managing trusts.
Jim shares his insights on National Advisors Trust’s unique offerings and their approach to asset management. The conversation also touches on current trends in estate planning, the significance of trusts for asset protection, and the growth opportunities for financial advisors in integrating trust services into their practices. Make sure to tune in!
Acknowledgements and Important Disclosures
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