‘Senior Inflation’: The Not-So-Silent Retirement Killer
Health care costs are a huge part of retirees’ financial picture, and they keep jumping at a rate faster than other prices overall. Here are some strategies to cope.


While overall inflation may remain subdued for years, health care costs and other related items that affect retirees the most continue to rise at a sharp pace. According to the Bureau of Labor Statistics — the government agency that provides Congress the data that they use to determine increases in Social Security, Medicaid and Medicare — health care related costs have risen by nearly 4% annually over the past decade, a pace nearly double that of overall inflation.
Moreover, the BLS also publishes a Consumer Price Index for the Elderly. While this doesn’t break out health care specifically, it reinforces the fact that life’s necessities get progressively more expensive as you age. By some estimates, including a 2014 study by Boston College, health care costs for retirees may represent over 10% of their annual expenditures and may rise by as much as 8% annually over the next 25 years.
From an investment perspective, this means that you need to account for greater annual distributions (cash-flow) from your investments to keep up with these costs over time.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
One simple, popular strategy to help with this is investing in high-quality dividend-paying stocks. The key here is “high-quality.” Investors should focus on strong balance sheets and companies that have a consistent track record of raising their dividends – the so called “Dividend Aristocrats.” Investors are wise not to simply look for the highest yielding stocks, as these could be troubled companies whose stock may fall sharply.
I do not recommend inflation-adjusted bonds, as these tend to be pegged to overall inflation, which is likely to remain muted. However, allocating a portion of your portfolio to floating rate bonds, in particular higher-quality ones, may have some long-term benefits. These types of bonds generally adjust their interest rates up or down at a fixed schedule based on overall interest rates. Given that rates are likely to rise over the next few years, this represents a decent alternative to fixed-rate bonds that yield very little right now.
There are also annuities available that have medical riders, which do not require any medical exam (although there is a waiting period before this benefit can be triggered). While I’m generally not a fan of annuities as I find them too expensive in relation to the benefits they provide, this is an example where the products’ cost and benefits match up. Before considering such an investment, make sure to fully understand all of the costs and restrictions associated, and shop around — more and more insurance companies are offering low-cost and no-load annuities with increasing benefits.
Finally, as with any investment or financial plan, try to anticipate the unexpected. How would you handle a sudden $30,000 medical bill due to a longer hospital stay? What about in-home care expenses? Discuss these with your family and your financial adviser now, and plan on those costs rising at a faster pace than any other expense.
This column is the last in a six-part series on investor education.
- Column 1 – Understanding your goals
- Column 2 – Why benchmarking to the S&P 500 is not a good strategy
- Column 3 – It’s about cash-flow, not returns
- Column 4 – How much are you paying for your portfolio?
- Column 5 – 5 critical questions to ask your financial advisor
- Column 6 – ‘Senior Inflation’ the not so silent retirement killer
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Oliver Pursche is the Chief Market Strategist for Bruderman Asset Management, an SEC-registered investment advisory firm with over $1 billion in assets under management and an additional $400 million under advisement through its affiliated broker dealer, Bruderman Brothers, LLC. Pursche is a recognized authority on global affairs and investment policy, as well as a regular contributor on CNBC, Bloomberg and Fox Business. Additionally, he is a monthly contributing columnist for Forbes and Kiplinger.com, a member of the Harvard Business Review Advisory Council and a monthly participant of the NY Federal Reserve Bank Business Leaders Survey, and the author of "Immigrants: The Economic Force at our Door."
-
Dow Adds 300 Points, Ends Losing Streak: Stock Market Today
The Dow, the S&P 500 and the Nasdaq head into the weekend on high notes after posting gains for the first time since Monday.
-
Quiz: Coast, Barista, Lean or Fat? Which FIRE Retire Early Style Is Right For You?
Test your knowledge of the different types of FIRE (Financial Independence, Retire Early) with this short quiz.
-
A Financial Adviser's Guide to Divorce Negotiations: Civil — or Not
Whether you go through a friendly mediation or a contentious court battle, all divorce agreements need to address the same key issues.
-
One Family's 529 Journey: A Guide to Smart College Savings, From a Parent Who's Also a Financial Professional
529 savings plans have been key to funding my three children's college journeys. Here are some tips for saving for a loved one's education, based on my experience as a parent.
-
The October 15 Tax Deadline Is Coming: A Tax Attorney Highlights What You Need to Know
If you filed an extension in April, time is running out to get your taxes wrapped up for last year. Here's what you need to know for filing your 2024 taxes and preparing for tax year 2025.
-
Three Strategies to Take Advantage of OBBB Changes, From a Financial Planning Pro
Four of the One Big Beautiful Bill's changes could impact your retirement, so it's smart to review your financial plans to see if these strategies would help you get the most out of the new provisions.
-
I'm a CFP: Here's What You Should Do if Your Financial Adviser's Firm Gets Acquired
You've had the same financial adviser for a long time, but things are changing. Now what? Stay the course, or jump ship? Five questions could help you decide.
-
ABLE Accounts: A Special Needs Consultant Breaks Down Common Myths
ABLE accounts help thousands of people with disabilities, but misconceptions still prevent eligible families from applying. Here, a financial professional separates fact from fiction.
-
What One Widow's Ordeal Teaches Us About Marriage and Money
A man charmed a 72-year-old widow into marriage, and then her accounts were seized to pay off his debts, highlighting the importance of background checks on potential spouses as well as prenuptial agreements.
-
Are You Getting a Gray Divorce? These Six Financial Strategies Come From a Financial Planner
Managing an equitable division of assets, selling a home, negotiating alimony and splitting retirement accounts are among the money matters that weigh as heavily as emotional issues.