What Does Healthcare Really Cost in Retirement?

I think about this often for myself, and for my patients. Costs of healthcare continue to rise, and the transition from a time in life with steady income to a time of fixed income can be a challenging hurdle to overcome. Retirement is often imagined as a time of freedom—but for many older adults, healthcare becomes one of the biggest and most unpredictable expenses. Even with Medicare, retirees face premiums, deductibles, copays, and services that aren’t covered at all. So what does it actually cost?

Let’s break it down.

💰 The Numbers: What to Expect

According to Fidelity’s 2024 Retiree Health Care Cost Estimate, the average 65-year-old couple will need approximately $330,000 to cover healthcare expenses throughout retirement. This includes:

• Medicare premiums (Parts B and D)

• Copays and coinsurance

• Prescription drugs

• Out-of-pocket costs for services not covered by Medicare

And that’s not including long-term care, dental, vision, or hearing aids.

Annual spending also increases with age:

• Ages 65–74: ~$13,000/year

• Ages 75–84: ~$23,000/year

• Ages 85+: ~$40,000/year

🩺 What Medicare Covers—and What It Doesn’t

Medicare helps, but it doesn’t cover everything. Here’s a quick refresher:

• Part A: Hospital insurance (usually premium-free)

• Part B: Doctor visits, outpatient care (monthly premium required)

• Part C: Medicare Advantage (bundled private plans)

• Part D: Prescription drug coverage

Not covered: Long-term care, most dental and vision services, hearing aids, and custodial care.

📉 Planning Ahead: How to Prepare

To manage healthcare costs in retirement:

• Budget for premiums and out-of-pocket expenses—don’t assume Medicare is free

• Consider a Medigap or Medicare Advantage plan to reduce surprise bills

• Explore Health Savings Accounts (HSAs) if you’re still working and eligible

• Plan for long-term care—70% of adults over 65 will need it at some point

• Review your coverage annually to ensure it still fits your needs

🧓 What About Long-Term Care?

One of the most significant healthcare expenses in retirement is long-term care, such as nursing homes or in-home assistance with daily activities. Medicare does not cover long-term custodial care, but Medicaid is the primary payer for long-term care services in the U.S.

To qualify, individuals must meet strict income and asset requirements. Medicaid covers care in nursing facilities and, in many states, offers Home and Community-Based Services (HCBS) that help older adults remain at home longer. Planning ahead—through savings, long-term care insurance, or Medicaid eligibility strategies—can help reduce the financial burden later in life.

Healthcare costs in retirement are real—but with the right planning, they don’t have to be overwhelming. By understanding what Medicare covers, estimating your likely expenses, and including long-term care in your financial strategy, you can protect both your health and your savings.

✨ Have you factored healthcare into your retirement plan? Now’s the time to start.