Retirement’s Rising Costs: The Quiet Squeeze
Why rising insurance, healthcare, and housing costs are quietly reshaping retirement
Retirement today looks very different than it did for previous generations. Pensions that once provided steady monthly income are now rare, leaving most retirees to rely on a combination of Social Security, personal savings, and investment income. On the surface, that may seem perfectly sustainable—but the costs retirees face today are growing faster than the income sources meant to support them.
Healthcare premiums, homeowners insurance, and long-term-care coverage have all climbed sharply, while Social Security cost-of-living adjustments (COLAs) and even modest pension increases lag far behind. For retirees who have planned carefully and want their savings to last, it’s crucial to understand how these shifting costs can quietly erode financial comfort over time.
A Growing Divide Between COLAs and Real-World Costs
“Health-care expenses for retirees are climbing at a rate that far outpaces Social Security’s annual cost-of-living adjustments.” (Investopedia, 2025) The Social Security Administration recently announced a 2.8% COLA for 2026, equal to about $56 per month for the average retiree. (SSA, 2025) That increase helps, but it doesn’t come close to matching recent medical and insurance inflation, as standard Medicare Part B premiums are projected to rise by 11.6% next year—meaning that much or all of the COLA will be consumed by healthcare costs alone. (Investopedia, 2025)
Meanwhile, Fidelity estimates that a 65-year-old couple retiring this year will need about $172,500 just to cover expected medical expenses in retirement—excluding long-term-care needs. (Fidelity, 2025)
With pensions no longer providing guaranteed lifetime income for most workers, this widening gap between predictable income and unpredictable expenses makes proactive planning more important than ever.
Insurance Premiums: Higher Risk, Higher Costs
Insurance is meant to provide protection and peace of mind—but lately, premiums themselves have become a source of stress. Homeowners, auto, and umbrella policies have all experienced steep increases.
Since Medicare premiums are withheld automatically from Social Security benefits, the drop in take-home income occurs silently, catching many retirees off guard when their anticipated COLA increase is quietly absorbed before it ever reaches their account.
Across the broader market, the Insurance Information Institute points to “economic inflation, severe weather, social inflation, and higher reinsurance costs” as primary causes of rising insurance rates. (III, 2025)
For retirees living in coastal, wildfire-prone, or otherwise high-risk areas, premiums can easily outpace general inflation. Some insurers have even exited these regions altogether, leaving limited and more expensive replacement options.
Property Taxes: The Other Side of the “Tax-Friendly” Story
Many retirees move to states such as Florida or Texas to take advantage of the lack of state income tax, expecting a lower overall tax burden. But property-tax trends in these same states tell a different story.
In Florida, the median property-tax bill has jumped about 35% in just five years, while total statewide levies have soared 108% over the past decade—far outpacing both population growth and general inflation (Axios, 2024 | Florida TaxWatch, 2025).
Even for retirees who own their homes outright, these higher assessments can still tighten monthly cash flow. And in many of these same “tax-friendly” states, cities are increasingly exposed to hurricanes, floods, and severe storms—a double whammy of rising property taxes and sharply higher homeowners-insurance premiums that, in some regions, are becoming both costly and difficult to obtain.
Healthcare Costs: The Slow Creep That Compounds
For retirees enjoying good health, medical costs can seem manageable—until steady annual increases start compounding. Medicare Part B, Medigap, and Part D premiums have averaged 5–8% annual increases in recent years. Milliman’s 2025 Retiree Health Cost Index projects that a healthy 65-year-old man retiring this year will spend roughly $275,000 on health care throughout retirement. Costs tend to be even higher for women, $313,000, largely because of longer life expectancy and the reality that many women provide care for their spouses but often outlive them—leaving them to shoulder their own health expenses later in life. (Milliman, 2025)
For some, these aren’t crisis-level numbers—but they highlight an important truth: when expenses rise faster than income, purchasing power declines. Over time, even modest gaps can compound into meaningful lifestyle changes. That’s why it’s essential to ensure your financial plan anticipates higher healthcare costs in later years, when they often become most significant.
In my article, “The 5 Biggest Retirement Mistakes You Can Still Avoid,” I discuss how one of the most common—and costly—oversights is underestimating future healthcare and long-term care expenses. These rising costs can significantly impact even well-prepared retirement plans, making it essential to address them proactively.
Long-Term Care: When Even “Covered” Isn’t Certain
Long-term-care (LTC) insurance was once considered the hallmark of responsible planning, but even for those who purchased policies years ago, the landscape has changed.
Morningstar reports that average LTC premium increases reached 28% in 2024 as insurers adjusted for higher care costs and longer life expectancies. (Morningstar, 2024) Some carriers have reduced coverage benefits, lengthened elimination periods, or exited the LTC market entirely.
Even those with coverage face uncertainty: state-approved premium increases can still occur, and the costs of assisted living, home health aides, and memory care often rise faster than inflation. Effective planning means knowing exactly what your policy covers—and what it doesn’t—and ensuring that potential long-term care expenses are fully integrated into your overall financial plan.
Retirement Planning Is More Than Investment Management
Too often, people view “financial advice” and “investment management” as the same thing—but they’re not. Investment management focuses on how your portfolio performs. Comprehensive financial planning focuses on how your entire life plan performs—integrating income stability, taxes, insurance, healthcare, and long-term security.
A strong financial relationship should go beyond portfolio management to include planning for healthcare costs, insurance needs, and long-term care—areas that can make a lasting difference in your retirement security.
The goal isn’t just to grow your investments—it’s to protect your lifestyle and keep your plan adaptable as costs evolve. Learn more about Client First Capital’s Integrated Approach to wealth management.
Practical Steps to Stay Ahead
Review insurance policies each year. Compare premiums and deductibles; understand your coverage limits and exclusions and ensure increased costs are updated into your financial plan.
Track property-tax trends. Even small annual increases compound quickly.
Reassess long-term-care coverage. Understand your policy’s inflation protection and daily benefit limits, and have a clear plan in place for how potential care costs would be funded if you don’t carry long-term care insurance.
Keep liquidity in your plan. Accessible funds make it easier to absorb premium jumps or medical surprises without disrupting long-term investments.
The Bottom Line
Rising healthcare, insurance, and housing costs aren’t new—but the pace and persistence of these increases mean retirees need a more dynamic approach than ever before.Today’s retirement isn’t just about accumulating wealth; it’s about managing what that wealth must sustain.
Even with a strong financial foundation, reviewing your insurance, tax, and income strategies each year helps ensure your retirement plan stays aligned and resilient. If you haven’t recently evaluated how rising premiums and healthcare costs could affect your long-term outlook—or confirmed that these factors are built into your current plan—now is an excellent time to do so.
Taking a proactive approach helps preserve both your financial stability and your peace of mind in the years ahead. Contact us here to request a conversation with me or one of our advisors to learn more about how we can help you plan with confidence.
