What If Healthcare Costs More than Expected?

Healthcare is the wild card of retirement spending — it tends to rise faster than everything else, and it climbs just when you’re least able to absorb it. This recipe stress-tests your plan against a more expensive medical future.

New here? Build a baseline plan first with Getting Started. Background: Health insurance bridge.

How medical fits your plan. RetireRange models medical as its own line — drawn from your VEBA and HSA first, then your portfolio — and by default it sits on top of your spending target, not inside it. (That’s a difference from the classic 4% rule, which folds healthcare into a single total withdrawal.) So your withdrawal target should be your non-medical lifestyle spending; don’t also bake healthcare into it, or you’ll count it twice. Prefer a single all-in budget? Turn on Net-of-Medical on the Strategy tab.

The quick version

1. Raise your medical costs — the inflation rate and/or the dollar amounts.
2. Save it as a scenario ("Higher healthcare") — this recipe changes assumptions, so it’s a full scenario, not a named strategy.
3. Run it and compare against your baseline to see how much cushion you have.

Step by step

1. Turn up the pressure. Adjust one or more of:

• Medical inflation on the Assumptions tab — raise it above your baseline (healthcare has historically run several points above general inflation).
• Monthly medical expense on the Strategy tab — bump the base amount.
• Pre-Medicare bridge premiums on the Household tab — if you retire before 65, model richer-but-pricier coverage.

2. Save it as a scenario. Because medical inflation (Assumptions) and bridge premiums (Household) live in your baseline rather than in a withdrawal recipe, save this as a full scenario ("Higher healthcare") — not a named strategy. (If the only thing you change is the monthly medical dollar amount on the Strategy tab, you can save that as a named strategy and put it on the Compare tab against your baseline instead.)

3. Run it, then compare against your baseline.

How to read it. Read the result on the Compare tab with Compare against baseline on: your baseline line and your higher-healthcare line run on the same market sequences (shared seeds) — this now covers assumptions and account edits, not just strategy tweaks — so the gap between the two lines is the healthcare change itself, not luck. You still save it as a scenario rather than a named strategy, since medical inflation and bridge premiums live in your baseline.

Return to your baseline when you’re done. The medical-inflation and bridge-premium changes persist in your baseline, quietly making every future run more conservative — so click Load Baseline (⤺) to restore your saved plan when you’re finished. (If a higher medical-inflation rate is genuinely your realistic default, keep it — see below.)

What to look at

• Success Rate — how much does a costlier medical future erode it?
• The late-plan years — medical costs bite hardest at the end, so watch the final decade of the trajectory and the ruin-probability curve.
• Whether your medical accounts keep up — see how long your VEBA and HSA last before medical costs spill into the general portfolio.

If higher healthcare costs strain the plan

• Fund your medical accounts — contributions to an HSA (and the HSA "stealth IRA" strategy) build a dedicated, tax-advantaged medical reserve.
• Budget for Medigap to cap your post-65 out-of-pocket exposure.
• Build a cushion elsewhere — a lower withdrawal target or larger cash reserve gives medical surprises somewhere to land. Set the reserve under Strategy → Cash Reserve Target, optionally with recovery refill so it rebuilds in good years (how it works).
• Use a separate, higher medical inflation rate as your planning default, not just a stress test — it’s the realistic assumption.