October Core Inflation and a Possible Fed Rate Hike in December
The latest data shows that inflation is hitting retirees the hardest.
Core inflation rose .3% in October, compared to September. There was not a year over year number reported because we didn’t get a report in October 2025 due to a government shutdown. LPL Research points out the latest data supports the likelihood that the Federal Reserve will increase interest rates in December. How much of a hike remains to be seen, but a half point bump is not out of the question.
Healthcare Costs Rising Faster Than Core Inflation
Taking a closer look at inflation shows overall health care costs rising at a rate higher than core inflation. Medical expenses were up .5%, and medical services rose .3%. Hospital services rose .8%, and doctors’ services increased .4%. Prescription drug costs rose .3%.
Dental Services and Medical Equipment Prices See the Biggest Increases
Dental services, which are not covered by Medicare, jumped .8%, and the biggest increase was the cost of medical equipment and supplies, which rose 1.4% month-over-month. These price increases are higher than previous cycles.
On the service side, LPL points to a tight labor market and the difficulty finding qualified workers as reasons for price pressures.
How Much Will Healthcare Cost in Retirement?
According to Fidelity, about 15% of the average retiree’s annual expenses will be health-related, and on average, a 65-year-old who leaves the workforce this year may need $185,000 in savings to cover out-of-pocket healthcare expenses throughout retirement. That’s in addition to what Medicare pays for, and that estimate doesn’t even include long-term care expenses, over-the-counter medications, and most dental services.
Healthcare Is a Necessity Seniors Can’t Budget Around
Shannon Benton, the executive director of the Senior Citizens League, a nonprofit advocacy organization, told Yahoo Finance, “These aren’t luxuries. They’re necessities that older Americans often have little choice but to pay for. Seniors can’t budget their way out of getting sick or needing medication.”
Planning for Healthcare Costs Before Retirement
So, what do we do about it? We will be watching Washington to see what a new Congress will do with Medicare and even the merits of healthcare for all, but, as always, we have to control what we can control. There may not be much a current retiree can do, but if you are approaching retirement, these numbers point out the need to plan for more than the fun part of retirement.
Build a Retirement Income Plan That Keeps Up With Inflation
Here are three ways to do that. First, have a retirement income plan that raises your income over time to deal with overall inflation. Prices are not going to go down in retirement, and Social Security is not going to keep up with it.
Use a Health Savings Account (HSA) to Save for Healthcare Costs
Next, find out if you have access to an HSA. A health savings account is a triple-tax advantaged tool to save for healthcare costs. If you have a high deductible insurance plan, you can get up to $4,400 a year as an individual, and $8,750 as a family into the plan. You should be able to invest the funds for long-term growth and future use.
Plan for Long-Term Care: Insurance or a Dedicated Long-Term Care Bucket
Next, plan for long-term care. Determine whether you need to leverage an insurance company by committing some of your monthly income to premiums for a policy that will pay for your care, or if you have retirement assets that will not be needed for income, you can set some aside and create a long-term care bucket to pay for services if needed.
Bottom Line: Reaching Financial Independence Takes a Plan
Bottom line, retirement is about more than just investments. Reaching financial independence depends on making a plan for it.
Securities are offered through LPL Financial, Member FINRA/SIPC. GenWealth Financial Advisors is an other business name of Independent Advisor Alliance, LLC. All investment advice is offered through Independent Advisor Alliance, LLC, a registered investment adviser. Independent Advisor Alliance, LLC is a separate entity from LPL Financial.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
