When most people think about retirement, they imagine freedom. No more early alarms, a bit more travel, maybe spoiling the grandkids. But there's one area that often catches retirees off guard—not because it's unexpected, but because it’s not treated like a true financial priority: healthcare.
According to Fidelity’s 2024 estimate, a healthy 65-year-old couple retiring today will need over $315,000 to cover healthcare expenses during retirement. That number doesn’t include long-term care, and it assumes average health. If you experience chronic conditions, mobility limitations, or need extended care later in life, your costs could be significantly higher.
So the question isn’t if healthcare will be a major expense in retirement—it’s how you’ll plan for it.
The Real Costs You’re Likely to Face
Let’s look beyond the headlines and break down where those costs come from:
1. Medicare Premiums
Part B (doctor services) has a monthly premium that most retirees pay—over $2,000/year per person, and potentially more if your income is higher (due to IRMAA).
Part D (prescription drug plans) adds more monthly premiums, co-pays, and deductibles.
2. Out-of-Pocket Expenses
Even with Medicare, you’ll still pay for deductibles, co-insurance, and uncovered services. These can add up quickly for those managing multiple prescriptions or chronic health issues.
3. Dental, Vision, and Hearing
None of these are covered by Original Medicare, yet they are routine and necessary parts of aging well.
4. Long-Term Care
This is perhaps the biggest wild card. Seven in ten retirees will need some level of long-term care—and most of it is not covered by Medicare. In-home care, assisted living, and nursing home facilities range from $4,000 to over $10,000/month, depending on location and level of care.
How To Plan For it?
Step One: Treat Healthcare Like a Line Item
It might sound obvious, but many people simply don’t budget for healthcare. They build a retirement plan based on their desired lifestyle—travel, home upgrades, hobbies—but healthcare gets lumped into "miscellaneous" or assumed to be covered.
Instead, give it its own category:
Add up projected premiums and expected out-of-pocket costs.
Use tools like the Medicare Plan Finder to estimate coverage options.
Include long-term care as a "what if," even if you don’t yet have a funding strategy.
When you treat healthcare like housing or groceries—as an essential and recurring cost—you make better decisions in every other area of your plan.
Step Two: Pay Smarter, Not Just More
How you pay for healthcare can be just as important as how much it costs.
Here’s what most people overlook: Your income in retirement affects how much you pay for Medicare.
If your modified adjusted gross income (MAGI) exceeds certain thresholds, you’ll face higher premiums through IRMAA (Income-Related Monthly Adjustment Amounts). That means pulling too much from a pre-tax IRA in one year could increase your Medicare premiums the next (actually 2 years later).
To plan around that:
Coordinate withdrawals from Roth IRAs, taxable brokerage accounts, and pre-tax IRAs in a tax-efficient way.
Consider Roth conversions in lower-income years.
Keep healthcare expenses in mind when designing your withdrawal strategy—not just tax brackets.
Step Three: Use the Right Tools
Retirement planning isn’t just about account balances—it’s about using the right tools at the right time.
Health Savings Accounts (HSAs) If you’re still working and eligible for an HSA, this may be one of the most powerful accounts you have. It’s triple-tax-advantaged:
Tax-deductible contributions
Tax-deferred growth
Tax-free withdrawals for qualified medical expenses
Many retirees make the mistake of using HSA funds early. But if you can afford to pay current expenses out-of-pocket and let your HSA grow, it can become a tax-free healthcare fund in retirement—perfect for Medicare premiums, long-term care insurance, and more.
Long-Term Care Insurance or Hybrid Policies
Not everyone needs insurance—but everyone needs a plan. Some may self-fund. Others might consider hybrid life insurance policies with long-term care riders. The right answer depends on your health, assets, and legacy goals.
Bottom Line: Don’t Let Predictable Costs Derail Your Plan
Healthcare is one of the few major expenses in retirement that is both predictable and under-planned.
You don’t have to know exactly how your health will unfold. But you can plan for the fact that it will change—and you’ll need resources to deal with it. Build it into your plan now. Budget for it intentionally. Use smart withdrawal and funding strategies. And if you’re not sure how to get started, talk to your planner—or connect with someone who can walk you through your Medicare and long-term care options. I've made a video about this topic: Healthcare - The Line Item You're Not Thinking About
This isn’t about fear. It’s about readiness.
The better you plan for healthcare, the more freedom you’ll have to enjoy everything else.