They say being a smart shopper is the first step to financial stability.

Clients shopping for Medicare coverage should heed that advice if they want to avoid nasty surprises when paying for prescription drug coverage next year. Federal subsidies that have helped keep Part D drug plan premiums lower in recent years will stop after Dec. 31, which could impact both plan pricing and drug coverage, according to Kimberly Lankford, a Medicare expert and reporter at The Wall Street Journal. Making the wrong choice or simply failing to review one’s options could cause unnecessary strain on retirees’ budgets and even loss of access to preferred medications. Advisors can provide a huge benefit to clients grappling with the changes, but only if they’re up to speed on them.

“It’s always important to revisit Medicare decisions, but it’s even more important this year,” Lankford told Retirement Upside. “You have to look at all your options through the plan finder tools on Medicare.gov. Dig into the drug formularies and cost-sharing requirements. Do the whole analysis.”

Sayonara, Subsidies

The Trump administration’s choice to scrap the subsidies stole headlines last week, Lankford said, but the program was always temporary and would have phased out after 2027 anyway. They were created to help defray higher premium costs resulting from the Inflation Reduction Act’s capping of out-of-pocket spending for prescription drugs. About the cap:

• The annual spending cap is $2,100 in 2026, following an initial $2,000 cap implemented in 2025.
• The cap is linked to inflation and will increase to $2,400 next year.

“When the law passed, there was fear that the cap would disrupt Part D pricing or drug coverage,” Lankford said. “The Trump administration has voiced confidence that the market has now stabilized sufficiently and that ending the subsidies a year early isn’t a problem.”

Sticker Shock. The real effect on Part D premiums won’t be known until October, but even if premiums go up a lot, it’s important to keep the broader context in mind. “Some people might have a bit of sticker shock for their drug coverage options,” Lankford said. “Some might consider going down the Medicare Advantage route because of what seem to be attractive, low premiums. People need to be very careful about those decisions.”

That’s because Advantage plan premiums can look attractive, but that’s only part of the story. Advantage plans have limited provider networks and require more prior authorization for medical procedures, for example. There’s also greater cost sharing in general between the insurer and the insured.

Clients can always switch back to original Medicare later, but that comes with risks if their health declines, Lankford said. “It’s a very different animal, so again, it’s key to actually run the analysis and really look carefully at the total potential cost.”

It’s a pickle for the sandwich generation: Not enough bread to go around.

More than half of American caregivers (who make up nearly three in 10 of the population) said that caregiving responsibilities have impeded their ability to save for retirement or manage their household finances, according to a recent EBRI retirement confidence survey. It’s even more strained for those simultaneously caring for children and aging parents, about one in four US adults. Not only is it a financial challenge, but also an emotional one that advisors may find themselves tackling with their clients. Advisors can help their clients meet the challenge by creating a financial roadmap that aligns with their priorities and protects their own retirement.

“The first part of the conversation is just providing that space to hear, ‘What’s going on? How are you feeling about it?’” said Sofia Figueroa, an advisor at Ellevest. “The next is really establishing what is actually the most important to my client … What are the right boundaries to set if we can’t necessarily accomplish providing all the time and all the resources to everyone involved.”

Spread Too Thin

Saving for retirement while contributing to a child’s college fund or a parent’s healthcare needs can be stressful, but, as on an airplane, it’s important to put on your own oxygen mask before helping others, said James Jacobson, an advisor at Girard. “I always think, boy, that sounds awful selfish. But if you’re dead first, you can’t help anyone,” he said. Likewise, “if you’re broke first, you can’t help others.”

It’s also important for clients to have the hard conversations about money and caregiving with their families as soon as possible, Figueroa said:

• If the conversation happens before any significant health or financial events, clients can overfund their retirement now to allow them to shift priorities in the future, or adjust where they allocate their savings so those dollars are more flexible.
• Clients should make sure their own insurance, whether that’s life or disability insurance, is up to date, so if something happens to them, the people financially depending on them have some protection.

Don’t Let the Bread Get Stale. Clients in a sandwich-generation situation can find that their circumstances change quickly, said Harman Johal, an advisor with US Bank Wealth Management. Advisors should “have more frequent touch points with these individuals, so that you can get ahead of certain situations or advice or planning,” he said. “Things are going to evolve and change more frequently than with some other clients.”

If you’re reading Retirement Upside, you’ve probably heard of the 4% rule.

In case you haven’t, it’s generally considered a safe income planning guideline that lets retirees withdraw 4% of their total savings in the first year of retirement and then adjust that dollar amount for inflation every year afterward to make their nest egg last for 30 years. The rule is ubiquitous in the mainstream media and among popular financial planning voices online, thanks to its straightforward answer to a daunting financial planning question: How much can clients spend in retirement without risking poverty in old age? But they may be surprised to learn that the rule’s creator, Bill Bengen, never intended it to be a baseline for retirement income planning. Quite the opposite, in fact.

“It’s actually a rule that only applies for a very narrow segment of the population in practice,” Bengen recently told Retirement Upside. Ultra-risk-averse people living off a 401(k) account who want to make sure their retirement income plan would have worked out without adjustment during the worst period in the modern history of the stock market should follow it. Others who are accepting of more risk can afford to draw more income, especially if they’re willing to make adjustments along the way.

“I never intended it to be a panacea for ‘safe’ retirement income planning, but that’s kind of what it’s become,” Bengen said.

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