Allstate Retirees Face Rising Health Care Costs: Insights from Patrick Ray & Tyson Mavar

'With health care inflation outpacing general costs, Allstate employees should consider building personalized strategies that include HSAs and emergency reserves to help manage future medical expenses.' — Michael Corgiat, a representative of The Retirement Group, a division of Wealth Enhancement.

'As medical expenses continue to rise, Allstate employees benefit from proactively incorporating health care costs into their retirement planning through customized approaches like HSAs and dedicated emergency funds.' — Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article we will discuss:

1. How health care inflation impacts retirement planning for Fortune 500 employees.

2. Strategies with Health Savings Accounts (HSAs) and emergency medical funds.

3. The need for tailored planning to meet Medicare gaps and long-term care needs.

Managing retirement health care costs calls for thoughtful planning, especially as medical expenses continue to outpace general inflation. Yet, for Fortune 500 professionals approaching retirement, generic guidance often misses the mark. Patrick Ray and Tyson Mavar of The Retirement Group, a division of Wealth Enhancement, recommend a customized approach that factors in health care inflation, coverage choices, tax-efficient tools, and access to liquid funds for unexpected medical events.

Health Care Estimate for Retirees

According to the Fidelity Retiree Health Care Cost Estimate, a 65-year‑old retiring in 2025 may need approximately $172,500 saved to cover health and medical expenses during retirement—an increase of over 4% since 2024. ¹  Notably, this estimate assumes enrollment in Medicare Parts A, B, and D and excludes the costs of long‑term care.

Of that estimate, 44% of the costs would go to Medicare Parts B and D premiums, 47% relate to standard out‑of‑pocket costs (such as co-payments and deductibles), and 9% would be needed to purchase prescription medications. ¹

These trends are particularly concerning given that roughly 20% of Americans say they haven’t considered health care in retirement planning, while 17% haven’t taken any planning steps yet. ²

For its part, the Employee Benefit Research Institute (EBRI) notes that a 65‑year‑old couple with higher prescription drug expenses may need as much as $413,000 to have a 90% likelihood of covering their medical needs in retirement. ³

The Value of a Personalized Retirement Health Care Approach

In light of this data, Ray and Mavar recommend developing a retirement health care strategy tailored to each individual's situation, particularly for those at large employers like Fortune 500. Key components could include:

• - Estimating expected medical needs

• - Using Health Savings Accounts (HSAs)

• - Keeping readily available funds for emergencies

• - Aligning health care coverage with lifespan and income expectations

1. Estimating Your Health Care Budget

Although industry research offers a baseline for average health care costs, it does not consider the full range of medical expenses Allstate employees could face post-retirement. For instance, if you factor in costs related to long-term care, estimates could balloon by an additional $26,000 to $127,750 per year. ⁴

Beyond long-term care, additional cost categories could include:

• - Medicare premiums

• - Prescription medications and co‑pays

• - Services not covered by Medicare (e.g., dental, vision)

Ray and Mavar caution Fortune 500 professionals not to underestimate these figures when planning.

2. Gaps in Preparedness

With 17% of Americans having taken no action to plan for health care in retirement, Ray and Mavar emphasize treating health care planning as a central component—not an afterthought.

3. Making Full Use of HSAs

Ray and Mavar suggest consistently contributing to HSAs during working years. For instance, a 35‑year‑old contributing up to $4,300 annually and assuming a 7% return might accumulate over  $500,000  by age 65, including approximately  $140,000 in tax savings . Only about  30%  of HSA holders currently invest those balances.

In their recent webinar, ' Leveraging HSAs to Reduce Health Care Costs ,' Mavar described benefits such as tax‑free growth and withdrawals for qualified medical expenses for those with high‑deductible health plans.

4. Building an Emergency Medical Reserve

Unexpected diagnoses or emergencies can quickly drain resources. Mavar recommends a separate cash reserve—such as in a money market or high‑yield savings account—outside primary retirement accounts. This may help retirees handle health care shocks without impacting long‑term investments.

• Broader Economic Landscape: Health Care Inflation and Trends

Health care spending is projected to continue rising. In a report published by federal actuaries, U.S. health care spending is expected to rise by 7.1% in 2025—well ahead of general inflation. ⁵  Reasons for this rise range from growing personal health care spending and hospital spending growth, to prescription drugs and physician services. As a result, health care expenses could account for 20% of U.S. GDP by 2033. ⁵

At the same time, many health care insurers report higher medical-loss ratios, indicating increased spending on care—including chronic disease management and mental health services—costs that could be passed down to retirees.

Key Recommendations for Retirement Health Care Preparation

• As Mavar and Ray note, the $172,500 estimate for those retiring in 2025 is simply a starting reference point. Early retirement or long-term care needs could push your total higher.

• If you are among the percentage of people who has not yet considered health care costs in your retirement planning, now is the time to start. By leveraging the triple tax advantages available through HSAs, putting aside sufficient reserves to address medical emergencies, and exploring individual strategies that take your personal coverage choices, retirement timing, and health conditions into account, you can build a safety net that considers your long-term health care spending needs.

Final Thoughts

Health care outcomes and personal circumstances vary widely—especially among long‑time Fortune 500 professionals. A tailored planning strategy—covering realistic spending projections, full use of HSAs, dedicated medical reserves, and thoughtful coverage choices—can help support a more predictable and manageable retirement journey.

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Allstate offers a cash balance pension plan known as the Allstate Retirement Plan. Employees are eligible after one year of service and fully vested after three years. The plan credits the employee’s account annually with pay and interest credits. Allstate also provides the Allstate 401(k) Savings Plan, which matches 4% of contributions when employees contribute at least 6%. Employees are vested after two years, and the plan supports traditional and Roth contributions. [Source: Allstate Benefits Guide, 2022, p. 22]

Restructuring and Layoffs: Allstate has undergone significant layoffs as part of its "Transformative Growth Plan." In Q1 2024, Allstate completed a final round of layoffs, affecting approximately 8% of its workforce. This was part of a strategic move to streamline operations, cut costs, and invest in digital protection and identity protection​ (Allguard Advice)​​ (Agency Height)​. Benefit Changes: Allstate offers a 4% 401(k) match when employees contribute at least 6% of their paycheck. Additionally, the company provides a cash balance pension plan with vesting occurring after three years​ (Allstate Corporation)​.Allstate is making significant changes to its benefits packages, including potential reductions in pension benefits and alterations to the 401(k) plans. The company is also implementing a new sales and compensation program for agents in 2024, which is considered by many as unachievable and part of a broader strategy to shift from agent-based sales to direct corporate sales​ (TheLayoff.com)​​ (TheLayoff.com)​.
Importance: These changes are vital for employees and retirees who rely on these benefits for their financial security. The modifications to pension and 401(k) plans may affect retirement planning and long-term financial stability, necessitating careful tax and investment planning. Investors should be aware of these changes as they reflect the company’s efforts to manage its liabilities and improve financial performance. Politically, changes to employee benefits can influence labor relations and may be a point of contention in discussions about corporate responsibility and worker rights. | | Allstate | News: The ongoing restructuring has led to a cultural shift within Allstate, emphasizing a "command and control" management style and moving away from a participative, employee-centric approach. This shift has resulted in low employee morale and significant resistance from the workforce, many of whom are waiting for severance packages and planning their exits​ (TheLayoff.com)​​ (TheLayoff.com)​.
Importance: Understanding the cultural dynamics within Allstate is important for predicting future organizational performance and employee turnover rates. For investors, this cultural shift may impact productivity and innovation within the company, influencing its competitive position in the market. From an economic perspective, the shift in corporate culture and subsequent layoffs contribute to the broader trend of workforce displacement and the need for policies supporting retraining and workforce development. Politically, the treatment of employees during this restructuring may attract attention from labor unions and policymakers focused on workers' rights. |

Allstate provides stock options and RSUs as part of its equity compensation. Stock options are granted with a predetermined price and vesting period, while RSUs vest over a few years based on performance or tenure. In 2022, Allstate enhanced its equity programs, emphasizing performance-based RSUs. This continued in 2023 and 2024, with broader RSU programs and performance metrics for stock options. Executives and middle management are the main recipients, fostering long-term alignment with company performance. [Source: Allstate Financial Reports 2022-2024, p. 62]

In 2022, Allstate introduced improvements to its healthcare benefits, including enhanced mental health support and expanded telemedicine services. By 2023, the company continued to enhance its offerings with additional wellness programs and preventive care options. For 2024, Allstate’s healthcare strategy emphasized maintaining robust benefits and integrating new health technologies. The company aimed to address evolving employee needs with comprehensive support and innovative solutions. Allstate focused on providing effective healthcare coverage while managing costs. Their updates reflected a commitment to improving overall employee well-being.