February 26, 2026

Health care is one of the most significant and often underestimated retirement expenses. Explore Medicare, long-term care, and tax planning considerations for affluent families.

When most people think about retirement planning, they focus on investment returns, income replacement, and lifestyle goals.

What often receives less attention—particularly among affluent families—is health care.

Over a 20- to 30-year retirement, health-related expenses can represent a substantial and sometimes unpredictable component of total spending. For high-net-worth individuals, the issue is often not whether these costs can be covered, but how they are funded, taxed, and integrated into a broader wealth and legacy strategy.

Health care is not merely a line item—it is an ongoing planning consideration.

The Scope of Retirement Health Care Costs

Even with Medicare beginning at age 65, retirees remain responsible for:

• Medicare Part B and Part D premiums
• Income-related premium surcharges (IRMAA)
• Supplemental (Medigap) or Medicare Advantage coverage
• Dental, vision, and hearing expenses
• Out-of-pocket deductibles and co-insurance
• Long-term care or extended in-home assistance

For affluent households, IRMAA surcharges can increase Medicare costs following high-income years tied to liquidity events, business sales, Roth conversions, or concentrated asset transactions.

In addition, health care inflation has historically trended differently from general inflation, which may affect long-term planning assumptions. Actual costs will vary based on health status, geography, coverage elections, and future legislative changes.

Medicare Is Income-Sensitive

Many retirees are surprised to learn that Medicare premiums are tied to income.

Higher modified adjusted gross income (MAGI) can trigger premium adjustments two years after a high-income event. For example:

• A business exit at age 63 may influence Medicare premiums at age 65.
• A large capital gain in one year may affect health care costs in a later year.

Because IRMAA is recalculated annually, income sequencing decisions may influence future premium levels. While these adjustments cannot always be avoided, advance modeling may help individuals understand potential cost implications under different income scenarios.

Long-Term Care: A Significant Planning Variable

Long-term care remains one of the more uncertain financial variables in retirement.

Extended care may include:

• In-home assistance
• Assisted living
• Memory care
• Skilled nursing facilities

The financial impact of long-term care depends on duration, location, and level of care required. Some families choose to self-fund, while others explore insurance-based solutions. Each approach involves trade-offs related to liquidity, cost, flexibility, and estate planning objectives.

For high-net-worth families, planning discussions often center on:

• How care expenses may affect multigenerational wealth transfer
• Whether trusts or family entities should address potential care costs
• How to maintain liquidity without disrupting investment allocations

There is no universal strategy. Decisions should reflect individual goals, risk tolerance, and family structure.

Tax Considerations in Funding Health Care

Health care costs intersect directly with tax planning.

Strategic considerations may include:

• Evaluating Roth conversion timing relative to Medicare thresholds
• Using Health Savings Accounts (HSAs), if eligible
• Managing required minimum distributions (RMDs)
• Timing charitable contributions
• Structuring liquidity events thoughtfully

These decisions may influence Medicare premiums and the taxation of Social Security benefits. However, tax outcomes depend on evolving legislation, income variability, and personal circumstances.

Health Care and Estate Planning

Health care planning also intersects with legacy design.

Questions families may evaluate include:

• Could extended care spending alter intended wealth transfer plans?
• Are liquidity reserves sufficient to avoid selling long-term assets unexpectedly?
• Should estate documents address health-related contingencies?
• How should family governance discussions incorporate aging-related decision-making?

Health-related expenses can affect both retirement cash flow and long-term estate outcomes, particularly in multigenerational planning contexts.

Evaluating a Range of Scenarios

Many retirement projections assume steady spending patterns. Health care costs, however, can fluctuate based on medical events, coverage changes, and inflation trends.

Comprehensive planning may include evaluating:

• Pre-65 health insurance costs
• Income-driven Medicare adjustments
• Late-life care scenarios
• Longevity considerations
• Legislative uncertainty

Scenario analysis cannot predict individual outcomes, but it can provide a framework for understanding how different variables may affect retirement resources over time.

Over a multi-decade retirement horizon, health care may represent a meaningful portion of total expenses—particularly when long-term care is involved. The magnitude and timing of these costs vary significantly by individual circumstances.

For high-net-worth individuals and business owners, the focus is often on coordination: aligning health care considerations with retirement income planning, tax strategy, and estate design.

At Omni 360 Advisors and Omni Legacy Law, health care planning discussions are typically integrated into broader wealth and legacy conversations. If you are approaching retirement or evaluating a significant liquidity event, it may be appropriate to review how health-related expenses fit within your overall financial framework.

This blog was developed with the assistance of AI-based tools for research, drafting and editing support (Chat GPT), and reviewed by OMNI 360 personnel for accuracy and relevance.