Social Security and Healthcare Strategy

The Two Biggest Retirement Wildcards

🔄 Quick Recall: In the previous lesson, you built a tax-efficient withdrawal plan — learning to sequence withdrawals across account types, optimize Roth conversions, and avoid Medicare IRMAA surcharges. Now let’s tackle the two areas where most retirement plans are weakest: Social Security timing and healthcare funding.

These are “wildcard” expenses because they involve uncertainty: when should you claim Social Security? How much will healthcare actually cost? Will you need long-term care? How long will you live? Nobody knows the answers — but AI helps you model the range of possibilities.

Social Security Optimization

The Claiming Strategy Prompt

Help me optimize my Social Security claiming strategy.

My details:
- Date of birth: [month/year — no need for exact date]
- Full retirement age: [66/67 depending on birth year]
- Estimated benefit at full retirement age: $[X]/month
  (from ssa.gov — My Social Security account)
- Spouse's estimated benefit at FRA: $[X]/month (if applicable)
- Spouse's age: [X]
- My health: [excellent/good/managing conditions]
- Family longevity: [parents lived to approximately X]
- Other retirement income: $[X]/month from [sources]

Compare these claiming strategies:
1. Claim at 62 (reduced benefit)
2. Claim at full retirement age (full benefit)
3. Delay to 70 (maximum benefit — 124% of FRA amount)
4. Spousal strategy: I claim at 70, spouse claims at 62 (or vice versa)

For each: monthly benefit, break-even age, total lifetime benefits
at ages 80, 85, 90, and 95. Include tax impact at different income levels.

Key Numbers to Know

That’s a $1,350/month difference between 62 and 70 — over $16,000/year, for life, with cost-of-living adjustments.

Spousal Benefits

If you’re married, the calculation doubles in complexity. Strategies include:

• Higher earner delays to 70 (maximizes the benefit that continues as survivor benefit)
• Lower earner claims earlier (provides household income while the higher earner delays)
• Both delay to 70 (maximum combined benefit but requires other income sources for 62-70)

AI models each combination for your specific ages, benefits, and income needs.

✅ Quick Check: Why is the higher earner’s claiming age especially important? Because when one spouse dies, the surviving spouse keeps the HIGHER of the two Social Security benefits (not both). If the higher earner claimed at 62 ($1,750/month) instead of 70 ($3,100/month), the surviving spouse is locked into the lower amount for life. Delaying the higher earner’s claim to 70 is essentially survivor’s insurance — and it costs nothing except patience.

Healthcare Planning

Medicare Basics

At 65, you become eligible for Medicare. Here’s the framework:

What Medicare does NOT cover:

• Long-term nursing home stays (beyond 100 days skilled care)
• Assisted living
• Most dental care
• Most vision care (glasses, eye exams for prescriptions)
• Hearing aids
• Extended home health care

The Healthcare Cost Projection Prompt

Project my healthcare costs in retirement.

My profile:
- Retirement age: [X]
- Current health: [status]
- Current prescriptions: [number of regular medications]
- Family health history: [any chronic conditions?]

Model healthcare costs for three scenarios:

Scenario 1: Healthy aging (minimal medical needs)
Scenario 2: Average health (typical medical use + one chronic condition)
Scenario 3: High care needs (multiple conditions, eventual long-term care)

For each scenario, estimate annual costs for:
- Medicare premiums (Parts B and D)
- Medigap or Medicare Advantage premiums
- Out-of-pocket (deductibles, copays, coinsurance)
- Dental and vision
- Long-term care (if applicable in scenario 3)

Show: Annual cost at ages 65, 70, 75, 80, 85, 90.
Total lifetime healthcare spending for each scenario.

Long-Term Care Funding Options

The $120,000 average long-term care cost for a 65-year-old disguises extreme variation: some people need zero care, others need $500,000+.

Compare long-term care funding strategies for my situation.

My details:
- Age: [X]
- Net worth: $[X]
- Annual retirement income: $[X]
- Family history of long-term care needs: [yes/no/unknown]

Compare:
1. Self-insure: Earmark $[X] in liquid assets for potential LTC needs.
   How much should I set aside? What's the risk of running out?

2. Traditional LTC insurance: Typical premium at my age?
   Benefits? Risk of premium increases?

3. Hybrid life/LTC policy: One-time premium, provides both
   death benefit and LTC coverage. Typical costs and benefits?

4. HSA strategy: Build HSA balance for future medical/LTC costs.
   How much can I accumulate by retirement? Tax advantages?

For my financial situation, which approach makes the most sense?

✅ Quick Check: Why is self-insuring for long-term care risky for moderate-wealth households but reasonable for high-wealth households? Because a moderate-wealth retiree ($500K-$1M in assets) could see their entire nest egg consumed by an extended nursing home stay ($10,000/month for 3-5 years). The risk is catastrophic. A high-wealth retiree ($3M+) can absorb even an expensive care event without jeopardizing their overall plan. Self-insurance works when the potential cost is a manageable percentage of your assets — AI calculates whether that’s true for your situation.

Key Takeaways

• Social Security claiming age can differ by $16,000+/year between claiming at 62 versus 70 — AI calculates the break-even point for your specific health profile and income needs
• For married couples, the higher earner’s claiming age is especially important because it determines the survivor benefit for life
• Medicare covers significant healthcare costs but NOT long-term care, dental, vision, or hearing — plan for $3,000-8,000+/year in out-of-pocket costs
• The pre-Medicare gap (retiring before 65) requires careful income management to preserve ACA marketplace subsidies
• Long-term care costs average $120,000 but vary wildly — AI models which funding strategy (self-insure, insurance, hybrid, HSA) fits your asset level

Up Next: You’ll stress-test your entire retirement plan — running Monte Carlo simulations that model thousands of market scenarios, inflation spikes, and longevity risk to see if your plan holds up.