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

'With health care inflation outpacing general costs, Leidos Holdings 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, Leidos Holdings 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 Leidos Holdings 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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Leidos Holdings offers comprehensive retirement benefits, including a 401(k) plan and a pension scheme. Employees are eligible to participate in the Leidos 401(k) Retirement Plan, which includes a company match of 100% on employee Pre-tax and/or Roth after-tax contributions, up to 5% of eligible pay. Vesting for company contributions occurs over three years of service. Contributions can be made on a pre-tax, Roth after-tax, or traditional after-tax basis, and employees are immediately eligible to receive company contributions. The Leidos 401(k) plan offers a wide range of investment options, including both passive and active funds. Vanguard provides investment advice services for participants​ (Vanguard)​ (Leidos). For pension benefits, Leidos Holdings offers a matching pension scheme. This pension plan allows employees to save for retirement through a structured match program. The retirement contributions vary based on the fringe benefit package of the employee, and there are different options for how the pension plan is structured and managed based on the employee's needs​ (Leidos). Leidos Holdings has incorporated terminology such as "vesting," "Roth after-tax contributions," and "passive and active investment options" within their plans to clarify the specifics of the retirement benefits. These terms help employees understand how their savings will accumulate and what choices they have for investing for retirement.

Restructuring (2024): Leidos has announced a major restructuring in 2024, realigning its operating groups and making changes to corporate leadership. The company is now organized into five sectors: Health and Civil, National Security, Commercial and International, Digital Modernization, and Defense Systems. Leadership changes were also implemented to support long-term strategy execution. This restructuring is essential for the company to remain competitive in its industry and adapt to the evolving needs of national security and modernization efforts​ (Intelligence Community News). Importance: It is critical to address this restructuring news given the economic pressures and the strategic importance of defense and technology sectors in the political and security landscape. The company's reorganization can impact its financial stability and workforce, influencing investment decisions during uncertain political and tax environments.

Leidos Holdings offers a variety of stock options and RSUs (Restricted Stock Units) to its employees across several levels of the organization. Stock options at Leidos are primarily offered to senior management and key employees under the company's equity incentive plans, allowing them to purchase Leidos common stock at a set price within a defined period. The RSUs, on the other hand, are awarded as a form of deferred compensation, granted over a vesting period, which employees can convert into company shares upon meeting certain conditions such as tenure or performance​ (Leidos)​ (Leidos)​ (Leidos). In 2022, Leidos expanded its equity incentive program to include a wider pool of employees, particularly focusing on those in critical roles within national security and health sectors. The company's SEC filings show that RSUs were granted based on both performance metrics and time-based vesting schedules​ (Leidos)​ (Leidos). In 2023, Leidos continued this practice, issuing RSUs under their standard plan, with the stock options being reserved for more senior positions​ (Leidos). The vesting period typically spans three to four years, with performance-based RSUs awarded to leadership​ (Leidos). Leidos Holdings consistently aims to incentivize long-term commitment, granting equity to employees who are critical to the business's success.

Leidos Holdings offers comprehensive healthcare benefits designed to meet the diverse needs of its workforce. Employees have access to several health insurance plans, including four Consumer Directed Health Plans (CDHPs) with associated Health Savings Accounts (HSAs). These plans, known as Healthy Focus Plans (Basic, Essential, Advantage, and Premier), enable participants to manage their healthcare expenses while saving for future medical costs. Additionally, Leidos provides dental and vision coverage through national PPO plans and regional HMO options. Leidos also emphasizes mental health, offering behavioral health services via Teladoc for Aetna members and Virgin Pulse for overall wellness management. The company’s healthcare approach reflects its commitment to employee well-being in a dynamic economic environment, ensuring that workers are prepared for rising healthcare costs due to ongoing shifts in healthcare regulations​ (Leidos Benefits)​ (Leidos Benefits). The importance of discussing healthcare benefits at Leidos cannot be overstated, especially given the current political and economic landscape. With healthcare costs rising, Leidos' benefits program supports employees in making informed choices through tools like ALEX, a virtual benefits counselor. Furthermore, Leidos' partnership with wellness platforms like Virgin Pulse highlights their focus on preventive care and mental well-being. This proactive approach helps mitigate the financial burden on employees in a changing tax and healthcare policy environment. As political discourse increasingly focuses on healthcare reform, companies like Leidos play a crucial role in supporting their employees with flexible, comprehensive benefits that adapt to new legislative and economic realities​ (Leidos)​ (Leidos).