By Jeff Herman, investment advisor at The Jeffrey Group
There’s something nagging retirees and those approaching retirement. Even though they are saving at levels recommended by experts and the calculators say they are set, they are begging to worry their nest egg won’t cover a surprise healthcare shock.
Healthcare is a rapidly accelerating expense. In 2023, national health spending jumped 7.5 percent, about $14,500 per person, according to KFF. CMS data shows private insurance spending rose 11.5 percent.
Currently, ACA marketplace subsidies help prop up premiums. Thanks to enhancements from the ARP and Inflation Reduction Act, enrollees saved an average of $705–800 annually, cutting net premiums by roughly 44 percent, per KFF.
But those subsidies expire at the end of 2025. Without them, KFF predicts premiums could rise by 75 percent on average, possibly double in some states. In South Carolina, for example, premiums could jump dramatically without federal support. A Washington Post analysis shows a median proposed hike of 15 percent, with over a quarter of insurers requesting increases of 20 percent or more.
That’s serious sticker shock ahead. Without renewal, millions could lose coverage; those remaining will pay more.
Everyone’s situation is different, but I’ve begun asking clients if their plan can handle a 75 percent rise in healthcare costs or a major premium hike. I’d suggest that you consult with an advisor and stress-test projections. Model for higher healthcare inflation and look at funding sources that provide consistent income and diversification when it matters most.
In retirement, consistent income is critical. You can’t predict healthcare costs five or ten years from now. But you can build a retirement strategy that won’t collapse when the numbers change, one with durable, purpose-driven income streams that keep you in control.
Jeff Herman has 30 years of experience in the financial industry.