Healthcare is one of retirement's biggest (and most underplanned) expenses. The average retired couple will spend over $300,000!

In this deep dive, we’re focusing on how to understand these costs, prepare for them, and make sure they don't catch you off guard.

Mark and Linda had done almost everything right.

They'd saved diligently for 30 years, paid off their home, and retired at 62 with just over $1.2 million in their IRAs and brokerage accounts. They had a detailed budget for travel, dining, and leisure. What they didn't really have was a plan for healthcare.

As they entered retirement, they were faced with a couple of health challenges.

Two years into retirement, Mark needed a hip replacement, and the year prior, Linda was managing a new diabetes diagnosis.

Their out-of-pocket costs that year alone exceeded $20,000. And because they were still three years away from Medicare, they were paying over $1,800 a month in health marketplace premiums for a plan with a high deductible.

"We thought we'd planned for everything," Linda told me. "Healthcare was the thing we just assumed would work itself out since we had both been fairly healthy."

It's one of the most common blind spots I see in retirement planning. So, let's dig into how you can better plan for one of the looming expenses that retirees tend to overlook.

The Number That Should Get Your Attention

According to Fidelity's 2025 “Retiree Health Care Cost Estimate”, a 65-year-old retiring today can expect to spend an average of $172,500 on healthcare throughout retirement. That number has more than doubled since Fidelity's first estimate of $80,000 back in 2002, and it rises roughly 5% each year.

For couples, Milliman's “2025 Retiree Health Cost Index” paints an even more sobering picture: a healthy 65-year-old woman on Original Medicare plus a Medigap supplement could face $313,000 in lifetime healthcare costs, compared to around $275,000 for a man. Women's longer life expectancies are a key driver of that gap.

“Here’s the good news: nobody pays this as a lump sum. It accumulates gradually over years of premiums, copays, prescriptions, and occasional larger bills. The goal isn’t to set aside $172,500 on day one; it’s to plan for ongoing costs the way you’d plan any line item in your budget.”

Let's break down the four major categories you'll need to account for.

1. The Pre-65 Gap: Your Most Expensive Years

If you retire before 65 (the age when Medicare begins), healthcare becomes your most pressing financial challenge immediately.

Without employer coverage, your options are the ACA health insurance Marketplace, COBRA continuation from your former employer, or coverage through a working spouse's plan. Of these, the Marketplace is most commonly used by early retirees.

Here's what makes this complicated right now: the enhanced ACA premium tax credits that reduced costs significantly from 2021 through 2025 expired at the end of 2025.
As of early 2026, Congress has not yet passed a permanent extension. For a 64-year-old couple, that can mean annual premiums jumping from roughly $5,000 to over $16,000 or more, depending on their income and state.

No, that's not a typo!

A couple earning just over the 400% federal poverty level threshold (currently $84,600 for two people) could lose their subsidy entirely, causing premiums to increase by $1,000 or more per month overnight.

This is why income planning before age 65 matters so much. By carefully managing how much you withdraw from IRAs, when you take capital gains, and whether you draw from Roth accounts (which don't count as income for subsidy purposes), you may be able to keep your income below the subsidy threshold and dramatically reduce what you pay for coverage.

If you're planning to retire before 65, healthcare costs simply can’t be an afterthought; they should be one of the central planning areas in your retirement income strategy.

2. Medicare Premiums and Out-of-Pocket Costs

Reaching 65 brings significant relief. Medicare covers a substantial portion of your healthcare expenses, but it is far from free, and in 2026, it's more expensive than ever.

Medicare Part B premiums jumped 9.7% for 2026, crossing $200 per month for the first time, landing at $202.90 per person. The Part B deductible rose to $283 annually, and the Part A hospital deductible climbed to $1,736 per coverage period.

Higher earners pay more. If your income exceeds certain thresholds (called IRMAA — Income Related Monthly Adjustment Amounts), your Part B premium can reach $628.90 per month per person. This often catches retirees off guard when a Roth conversion or large IRA distribution in a prior year pushes income over the line.

Beyond premiums, Original Medicare still leaves you exposed to significant out-of-pocket costs. That's why most retirees pair it with either:

A Medigap (Medicare Supplement) policy, which fills many of the gaps in Original Medicare but typically carries a higher monthly premium.

A Medicare Advantage plan, which often has lower or $0 premiums but operates like an HMO with networks, referrals, and out-of-pocket maximums. The 2026 out-of-pocket max for Medicare Advantage in-network care is $9,250.

Neither option is universally better. The right choice depends on your health status, how often you see specialists, and your risk tolerance for variable costs. This is a decision worth revisiting during Medicare Open Enrollment each fall.

One frequently overlooked cost: dental, vision, and hearing. Original Medicare covers almost none of these, and they're near-certainties as you age. Budget separately for these, typically $1,500 to $3,000 per year for an average retiree.

3. Long-Term Care: The Risk Most People Ignore

Nearly 70% of retirees will need some form of long-term care at some point in their lives. This includes assistance with daily activities like bathing, dressing, or managing medications; services that Medicare does not cover.

The costs have gotten astronomical.

Assisted living facilities currently average over $6,000/month nationally.
While a private room in a skilled-nursing facility can often exceed $10,000/month!

If you need care for 2-3 years, which is common, you're looking at costs that can rival the price of a home.

Medicaid does cover long-term care, but only after you've spent down most of your assets. For most of the clients I work with, that's not an acceptable outcome.

Your options for managing this risk include:

Traditional long-term care insurance: However, premiums have risen significantly in recent years, but locking in coverage in your 50s before health issues arise is still one of the most effective strategies.
Hybrid life/LTC policies: These policies combine life insurance with long-term care benefits, providing you coverage if you need it and a death benefit to your beneficiaries if you don’t.
Self-insuring: Many of my clients fall into this camp. They have been effective savers and often have built up a large enough pool of retirement dollars that they choose to set aside a dedicated reserve rather than pay premiums over their lives.

For those single retirees with significant equity in their homes, we can often think of their home equity as a pseudo long-term care fund.

If they need ongoing care and there isn’t an assumption that they’ll return home, their home can be sold, and the equity proceeds can be used to fund ongoing care.

All in all, long-term care planning isn't about expecting the worst. It's about making sure one health event doesn't unravel decades of saving. The earlier you address it, the more options you have.

4. The HSA: The Most Underused Tool in Retirement Planning

If you're still working and covered by a high-deductible health plan, a Health Savings Account (HSA) may be the most valuable account you're not maxing out.

Here's why: HSAs are the only account in the tax code that offers a triple tax advantage.
1) Contributions are tax-deductible.
2) Growth is tax-free.
3) Withdrawals for qualified medical expenses are also tax-free.

No other type of account currently in existence provides for all three.

For 2026, individuals can contribute up to $4,300 and families up to $8,550, with an additional $1,000 catch-up contribution available to anyone 55 and older.

The key insight: you don't have to spend HSA money in the year you contribute it. If you invest the funds and leave them untouched while you're working, they can grow for years and then be used tax-free in retirement to cover Medicare premiums, dental care, long-term care premiums, and virtually any qualified medical expense.

Fidelity's research shows that only 15% of people ages 55 to 64 even have an HSA, and of those, more than half don't know it can serve as a retirement savings vehicle. That's a significant missed opportunity, especially in the years leading up to retirement when healthcare costs are about to become one of your largest budget categories.

What to Actually Budget

Rather than fixating on a single lifetime healthcare spend number, I encourage my clients to build healthcare costs into their retirement budget as a growing annual line item.

Here's a rough framework for planning purposes:

Ages 60–64 (pre-Medicare): Budget $1,500 - $2,500 per month for a couple, depending on ACA subsidy eligibility and plan selection.

Ages 65–74 (early Medicare years): Budget $500 - $1,000 per month per person for Medicare premiums and supplemental coverage, plus $125 - 250 per month for dental, vision, and hearing.

Ages 75+ (increasing utilization): Budget for higher out-of-pocket costs and begin factoring in the possibility of long-term care needs.

These are starting points. Your actual numbers will depend on where you live, your health status, the coverage you choose, and how you structure your retirement income.

The Bottom Line

Healthcare is the one retirement expense that is almost certain to be larger than you expect, harder to predict than you'd like, and more consequential than almost anything else in your financial plan.

But it's also very plannable. The clients who handle it best are the ones who address it early, before retirement, not after the bills start arriving.

If you're within five years of retirement and haven't mapped out your healthcare strategy, that's where we'd start. It affects your retirement date, your income strategy, your tax planning, and your estate plan.
Getting it right matters!!

Have any questions about what you’ve read? Let’s talk about them!