By Jason LaBarge
Americans are living longer than ever before, but that longevity comes with financial challenges for retirees.
Today, the average American lives to be 78. However, while medical advancements have extended lifespan, the average “health span,” the years lived in good health, is closer to 67 years. That means many individuals spend more than a decade managing chronic conditions or other health concerns later in life.
As a result, health care has become one of the largest expenses in retirement. In 2025, the average 65-year-old could expect to spend approximately $172,500 on health care throughout retirement, up from $165,000 in 2024. In Maryland, health care costs are projected to rise 6.5% in 2026, adding additional pressure to retirement budgets.
Planning ahead is essential. Below are several strategies to consider.
Annuities
Annuities have received mixed reviews over the years, but when used appropriately, they can serve as a valuable tool in a retirement plan. They are designed to provide a steady stream of income, which can help cover health care expenses in retirement.
Certain riders have optional features that provide added benefits and can enhance an annuity’s value. For example, a Guaranteed Minimum Income Benefit (GMIB) rider establishes a minimum level of lifetime income, even if market performance declines. This type of guarantee can help ensure reliable income for general living expenses or potential long-term care needs.
Annuities offer various structures and features, so it is important to carefully evaluate your individual goals, risk tolerance, and overall financial picture before selecting one.
Self-Insurance
Another approach is self-insuring, which means relying on your personal savings and investment portfolio to cover health care and long-term care costs.
While the average health care expense for a 65-year-old is around $172,000, actual costs vary widely depending on health status, longevity, and location. Choosing to self-insure requires a substantial level of savings and disciplined portfolio management to help ensure assets continue to grow and keep pace with inflation.
Because health care expenses tend to rise over time, younger individuals should plan for even higher future costs. This strategy can be effective but requires careful financial planning and ongoing oversight.
Long-Term Care Insurance
Long-term care insurance may be appropriate for individuals who prefer risk protection rather than relying solely on assets or income products. These policies function similarly to traditional insurance: You pay a premium in exchange for coverage if long-term care is needed. Benefits often include inflation adjustments to help preserve purchasing power over time.
In 2026, a $165,000 policy could cost $2,000 to $7,000 each year for the average 55-year-old, depending on your gender and whether you’re single or married. While this protects you, it can be costly over time, and if you never end up needing the policy, the money spent on premiums can’t be recouped.
Building a Retirement Plan That Supports Your Health and Wealth
Each of these options has advantages and trade-offs. The right choice depends on your assets, income needs, health outlook, and personal preferences. Consulting with a qualified financial professional can help you evaluate these strategies and design a plan tailored to your situation.
Beyond financial preparation, maintaining an active and healthy lifestyle can also play a meaningful role in reducing long-term health care costs. Studies show this can lead to positive long-term benefits, like increasing brain and heart health, lowering cancer risk and extending the length of independent living, potentially reducing your long-term care expenses.
You deserve a retirement that is both financially secure and personally fulfilling. With thoughtful planning and proactive health management, you can build a strategy that supports both your longevity and your quality of life.
Jason LaBarge, financial advisor and president of LaBarge Financial
7 Riggs Avenue, Severna Park, MD 21146
443-647-4321
www.labargefinancial.com
Securities offered only by duly registered individuals through Madison Avenue Securities LLC (MAS), member FINRA/SIPC. Investment advisory products and services made available through AE Wealth Management LLC (AEWM), a registered investment adviser. MAS and LaBarge Financial are not affiliated companies. Insurance products are offered through the insurance business LaBarge Financial LLC. AEWM does not offer insurance products. The insurance products offered by LaBarge Financial LLC are not subject to investment advisor requirements. Insurance guarantees are backed by the financial strength and claims paying abilities of the issuing carrier. LaBarge Financial is not affiliated with the U.S. government or any government agency. 3747506 – 2/26