Healthcare is becoming one of the biggest financial challenges facing retirees.
According to Fidelity Investments’ latest Retiree Health Care Cost Estimate, a 65-year-old retiring today can expect to spend an average of $185,500 on healthcare throughout retirement, a 7.5% increase from 2025.*
And that figure does not include long-term care.
For advisors, the takeaway is clear. Preparing clients for retirement means thinking beyond investment returns and identifying additional sources of liquidity that can help cover rising expenses.
At Abacus Life, we believe one often overlooked source is life insurance.
The Healthcare Gap Advisors Need to Address
Many retirees assume Medicare will cover most of their healthcare expenses. Fidelity found that 54% of pre-retirees incorrectly believe Medicare will cover all of their healthcare costs.
In reality, retirees can still be responsible for:
- Medicare premiums
- Deductibles and copayments
- Prescription drug costs
- Services not fully covered by Medicare
- Potential long-term care expenses
When these costs arise, clients often turn to their retirement accounts or investment portfolios for cash.
But that may not be their only option.
Could an Old Policy Become a New Source of Liquidity?
Many retirees own life insurance policies purchased decades ago for income replacement, estate planning, or family protection.
Over time, those needs can change.
Children become financially independent. Mortgages are paid off. Estate plans evolve. Yet clients may continue paying premiums on coverage they no longer need.
For eligible clients, a life settlement offers another option.
Instead of surrendering or lapsing the policy, a client may be able to sell it for a cash payment and eliminate future premium obligations.
Those proceeds can potentially help:
- Cover healthcare expenses
- Supplement retirement income
- Build additional cash reserves
- Prepare for future care needs
- Reduce pressure on investment portfolios
Give Retirement Assets More Flexibility
Consider a retiree who encounters a major healthcare expense during a market downturn.
Without another source of liquidity, the client may need to sell investments at an unfavorable time or increase withdrawals from retirement accounts.
If that same client owns a life insurance policy that no longer serves its original purpose, evaluating it for a life settlement could provide another option.
That is why life insurance deserves a place alongside investments, retirement accounts, cash reserves, and other assets when advisors plan for future healthcare costs.
Review the Policy Before the Need Becomes Urgent
The best time to identify potential sources of liquidity is before a client needs them.
As part of a retirement review, advisors should consider asking:
- Does the client still need the death benefit?
- Are premiums becoming a burden?
- Has the client’s financial situation changed?
- When was the policy last reviewed?
- Could the policy qualify for a life settlement?
A simple policy review could uncover an asset that helps strengthen the client’s broader retirement plan.
$185,500 Is a Reason to Start the Conversation
Fidelity’s latest estimate is an important reminder that healthcare needs to be planned for long before a crisis occurs.
For advisors, that means looking across the client’s entire financial picture and identifying every potential source of flexibility.
Sometimes, an old life insurance policy could play a new role.
Discover What Your Clients’ Policies Could Be Worth
If a client’s life insurance policy no longer serves its original purpose, consider evaluating its potential before healthcare expenses put additional pressure on their retirement assets.
*Fidelity. (2026, July 21). Fidelity Investments<strong>®</strong> Shares 25th Annual Retiree Health Care Cost Estimate, Highlighting the Importance of Incorporating Potential Health Expenses in Retirement Planning. Fidelity Newsroom; Fidelity. https://newsroom.fidelity.com/pressreleases/fidelity-investments–shares-25th-annual-retiree-health-care-cost-estimate–highlighting-the-importa/s/0dd560b4-98cb-492e-bdec-f7168f97aede
