How Much Will Healthcare Cost in Retirement? A Realistic Estimate

Healthcare is consistently the expense retirees underestimate most. You plan for housing, food, and travel — but healthcare has a way of consuming far more of a retirement budget than expected.

Fidelity’s 2025 estimate: a single 65-year-old retiring today will need approximately $172,500 (after tax) to cover healthcare expenses throughout retirement, and a couple roughly $345,000 — not counting long-term care. That figure rose more than 4% over 2024, and it assumes you have no employer retiree coverage but do qualify for Original Medicare. It’s a sobering number, and it deserves a detailed breakdown.

This guide explains what’s included, what’s excluded, and how to build a realistic healthcare budget for your specific situation — plus the moves that meaningfully lower the total, from IRMAA timing to the assistance programs many retirees don’t realize they qualify for.

Why Healthcare Costs Are Hard to Predict

Three things make retirement healthcare costs unusually difficult to estimate:

1. Longevity uncertainty — the longer you live, the more you spend. A 65-year-old has roughly a 50% chance of reaching 85 and a 25% chance of reaching 90.
2. Medicare premium volatility — Medicare Part B premiums have risen about 5–7% per year on average over the past decade. Standard projections often undercount this.
3. The long-term care wildcard — roughly 70% of people over 65 will need some form of long-term care. The costs are enormous and largely excluded from Medicare.

The Four Buckets of Retirement Healthcare Spending

Bucket 1: Medicare Premiums

Part B (Medical Insurance)

The 2026 standard Part B premium is $202.90/month per person. For a couple, that’s $405.80/month or $4,869.60/year — before any adjustments.

If your income exceeds certain thresholds, you’ll pay more due to IRMAA surcharges. In 2026:

Roth conversions, RMD income, and capital gains all count toward IRMAA income. Failing to plan for IRMAA can cost a couple an extra $1,900–$11,700 per year.

Part D (Prescription Drug Coverage)

Average Part D premiums range from $0 to $100+/month depending on the plan and your drugs. Part D also has an IRMAA surcharge ranging from $14.50 to $91.00/month per person in 2026.

The biggest Part D change: the Inflation Reduction Act capped annual out-of-pocket drug costs — $2,000 in 2025, rising to $2,100 in 2026 — with no more “donut hole.” This is a major improvement for people with expensive medications, and it fundamentally changes the retirement drug-cost math. See our full Part D breakdown for how the new coverage phases work.

Medigap or Medicare Advantage

Original Medicare alone covers roughly 80% of approved medical costs — you’re responsible for the rest with no annual out-of-pocket limit. Most retirees add either:

• Medigap (Medicare Supplement): Private policies that fill the gaps. Plan G premiums typically range from $100–$200/month at age 65, rising with age. By 80, premiums of $250–$350/month are common.
• Medicare Advantage (Part C): Plans often have $0 premiums but include copays and out-of-pocket maximums. The statutory maximum in 2026 is $9,250 for in-network care.

See our detailed cost comparison of Medigap vs. Medicare Advantage for scenario-based analysis.

Bucket 2: Out-of-Pocket Medical Costs

Even with solid coverage, you’ll face ongoing out-of-pocket costs:

• Part A deductible: $1,736 per benefit period in 2026 (per hospital stay, not per year)
• Part B deductible: $283/year (2026)
• Copays and coinsurance: Under Original Medicare, you pay 20% of Part B costs after the deductible
• Specialist visits, procedures, labs: Even with Medigap, ancillary costs accumulate

A reasonable estimate for a healthy couple with Medigap Plan G: $3,000–$6,000/year in out-of-pocket costs beyond premiums. This rises with age and health status.

Bucket 3: Dental, Vision, and Hearing

Original Medicare covers almost none of this. No routine dental. No glasses or contacts. No routine hearing exams or hearing aids. (One exception: surgically implanted cochlear implants, which Medicare covers as prosthetic devices, not hearing aids.)

These costs are larger than most people expect:

• Dental: Cleanings, X-rays, crowns, bridges, implants. A realistic annual budget: $500–$2,000 for routine care; a major procedure (implant, crown) can run $1,500–$5,000.
• Vision: Glasses or contacts every 1–2 years: $200–$600. Cataract surgery (often Medicare-covered for the procedure, but not premium lenses): $1,000–$4,000/eye for upgraded lens implants.
• Hearing: OTC hearing aids now start around $1,000–$1,500/pair. Prescription hearing aids: $3,000–$7,000/pair. They typically need replacement every 5–7 years.

Budget estimate for dental, vision, and hearing: $1,500–$3,500/year on average, more if you have significant dental needs.

See our guide on Medicare dental, vision, and hearing coverage gaps for plan options.

Bucket 4: Long-Term Care

This is the wildcard that breaks retirement budgets.

What Medicare covers: Very limited. Medicare covers up to 100 days of skilled nursing facility care after a qualifying hospital stay (with significant daily copays after day 20). It does not cover custodial care — help with bathing, dressing, eating, or managing medications.

What long-term care actually costs (CareScout/Genworth 2025 national medians, the most recent survey):

These costs keep climbing: assisted living rose 5% in a single year and in-home care 3%, outpacing general inflation. The average care need is about 2.5 years, but roughly 20% of people need more than 5 years. At today’s nursing-home rates, five years in a private room exceeds $600,000 — and prices in high-cost states (California, the Northeast) run well above these national medians.

Options to address long-term care risk:

• Long-term care insurance: Standalone or hybrid life/LTC policies
• Self-insurance: Enough assets to absorb the cost without derailing a spouse’s retirement
• Medicaid planning: Medicaid is the largest payer of nursing-home care in the country, but it requires spending down to very low asset levels; the rules are complex and state-dependent, and protecting assets for a healthy spouse takes advance planning
• Reverse mortgage: Home equity as a last-resort funding source

If Your Income Is Limited: Programs That Cut These Costs

The estimates above assume you pay full freight. Millions of retirees don’t have to — and many who qualify for help never apply because they assume they earn too much. If your income is modest, these programs can erase most of the premium and out-of-pocket burden:

• Medicare Savings Programs (MSPs) pay your Part B premium ($202.90/month in 2026 — about $2,435 a year back in your pocket), and the QMB level also covers Part A/B deductibles, copays, and coinsurance. The 2026 income ceilings reach roughly $1,816/month for a single person and $2,455 for a couple at the QI level, with a resource limit near $9,950/$14,910 — higher than most people assume, and several states have dropped the asset test entirely.
• Extra Help (the Part D Low-Income Subsidy) caps generic copays at $5.10 and brand copays at $12.65 in 2026, with $0 once you hit the catastrophic threshold — and qualifying for an MSP usually enrolls you in Extra Help automatically.
• Medicaid (full coverage, not just an MSP) is available at lower income/asset levels and is the only program that pays for long-term custodial care.

Because Medicare premiums are normally deducted straight from your Social Security check, an MSP doesn’t just lower a bill — it raises your monthly Social Security deposit. For a couple both on Part B, that’s nearly $4,900 a year in restored income. Always check eligibility before assuming you’re over the line; the income disregards (the first $20 of any income, plus $65 of earned income) push the real cutoffs higher than the headline numbers.

Lifetime Estimates by Health Scenario

The following estimates assume a single person retiring at 65, living to 85 (20 years), with Original Medicare + Medigap Plan G:

Scenario 1: Healthy retirement

• Annual healthcare spending: $8,000–$12,000/year
• Lifetime total (20 years, inflation-adjusted): $200,000–$280,000
• Long-term care: minimal or none

Scenario 2: Moderate health needs

• Annual healthcare spending: $12,000–$18,000/year
• Lifetime total: $280,000–$400,000
• Long-term care: 1–2 years, home care

Scenario 3: Significant health challenges

• Annual healthcare spending: $20,000–$30,000/year
• Lifetime total: $450,000+
• Long-term care: 3–5 years in assisted living or skilled nursing

For a couple, roughly double these figures — and plan for the possibility that one spouse outlives the other by a decade, carrying solo healthcare costs.

How Healthcare Costs Interact with Your Tax Plan

Healthcare costs aren’t just expenses — they’re part of your tax strategy.

Medical expense deduction: You can deduct medical expenses exceeding 7.5% of AGI. In high healthcare-cost years, this can create meaningful deductions — but only if you itemize.

HSA assets: If you have a Health Savings Account and are transitioning to Medicare, your accumulated HSA balance can pay Medicare premiums tax-free (except Medigap), Part D costs, dental, vision, hearing, and other qualified medical expenses. HSA assets are among the most tax-efficient funds to earmark for healthcare.

IRMAA management: Your Part B and D premiums in retirement are determined by your MAGI two years prior. Careful Roth conversion planning and retirement tax strategy can keep you below IRMAA thresholds, saving thousands per year.

Qualified Charitable Distributions (QCDs): Required Minimum Distributions that go directly to charity count as QCDs and reduce your MAGI — which means lower IRMAA tiers and potentially lower healthcare premiums.

The Survivor Cost Cliff Most Couples Miss

Here’s a planning blind spot that catches even diligent retirees: when one spouse dies, the household’s healthcare costs don’t fall nearly as much as its income does — and its IRMAA exposure can actually get worse.

When you go from filing jointly to filing as a single person, the IRMAA income thresholds roughly cut in half. A widow or widower with the same investment income that comfortably cleared the joint thresholds can suddenly land two or three IRMAA tiers higher as a single filer — paying hundreds more per month for the exact same Medicare coverage. At the same time, the household loses the smaller of the two Social Security checks, and one person’s medical and long-term-care needs often rise in the years after losing a spouse (the surviving spouse is the one with no caregiver at home).

The planning response is to model the survivor scenario, not just the joint one: keep some headroom below the single-filer IRMAA brackets, consider Roth conversions while both spouses are alive and brackets are wider, and make sure life insurance or asset earmarks account for the survivor’s solo healthcare and potential care costs. Our guide to spousal Medicare strategies walks through the survivor-bracket math in detail.

The Shape of Spending: Costs Aren’t Flat

Averages hide the timing. Retirement healthcare spending isn’t a straight line — it follows a rough U-curve, and budgeting for the average can leave you short in the years that matter:

• The transition years (62–67) can be expensive if you retire before Medicare eligibility and need to buy an ACA marketplace plan, or if you’re managing the enrollment timing around employer coverage to avoid late-enrollment penalties.
• The middle years (68–80) are usually the calmest — predictable premiums, routine care, manageable out-of-pocket costs.
• The final years are where spending spikes hardest. Studies consistently find that a large share of lifetime medical and long-term-care spending lands in the last few years of life, driven by chronic conditions, hospitalizations, and custodial care. This is exactly the period Medicare covers least (custodial long-term care), which is why the LTC decision dominates the back half of the curve.

The practical takeaway: don’t divide your lifetime estimate by your life expectancy and call it a monthly budget. Plan for a calm middle and a costly end, and keep the long-term-care reserve untouched until you actually need it.

How to Build Your Personal Healthcare Budget

Don’t use the Fidelity average as your number. Build a personalized estimate:

Step 1: Calculate your base premiums

• Part B: Start with $202.90/month, adjust for IRMAA if income may exceed $218,000 MAGI (joint) or $109,000 (single)
• Part D: Average $30–$50/month for standard plans
• Medigap: Get real quotes at age 65 (HealthMarkets, eHealth, your state’s SHIP)
• Or if choosing Medicare Advantage: $0–$50/month premium, but model the out-of-pocket maximum

Step 2: Add out-of-pocket and ancillary costs

• Budget $2,100–$4,000/year for out-of-pocket costs
• Budget $1,500–$3,000/year for dental, vision, hearing

Step 3: Stress-test for IRMAA

• Run your projected income (Social Security, RMDs, investment withdrawals, Roth conversions) against IRMAA thresholds
• If you’re near a bracket boundary, it may be worth converting to Roth earlier to reduce future IRMAA

Step 4: Plan for long-term care separately

• Don’t build LTC costs into your annual healthcare budget — they’re lumpy and unpredictable
• Instead, decide whether you’ll purchase LTC insurance, self-insure, or rely on a combination
• If self-insuring, earmark $200,000–$500,000 per person in your asset allocation for this purpose

Step 5: Inflation-adjust

• Healthcare inflation runs 4–6% per year — faster than general inflation
• A $15,000/year healthcare budget in 2026 grows to roughly $22,000 by 2036 at 4% inflation

The Bottom Line

For most retirees, healthcare will be the second-largest expense after housing — and potentially the largest in the final decade of life. The components:

Long-term care is on top of this, potentially adding $70,000–$128,000/year for several years.

The retirees who handle this best are those who planned for it explicitly: earmarked assets, built a tax-efficient withdrawal strategy, and made deliberate decisions about coverage — not those who simply hoped healthcare would work out.

Frequently Asked Questions

Does the Fidelity $172,500 figure include long-term care? No. The Fidelity estimate covers Medicare premiums, copays, coinsurance, deductibles, and out-of-pocket costs for prescriptions and services — but explicitly excludes long-term care, dental, vision, hearing, and over-the-counter costs. Those are real expenses you have to budget on top of it, which is why a realistic personal estimate often runs higher than the headline number.

Is it cheaper to budget for Medicare Advantage or Original Medicare plus Medigap? It depends on your health, not just the premiums. Medicare Advantage usually has a low or $0 premium but exposes you to copays up to the annual out-of-pocket maximum ($9,250 in-network in 2026), so a serious illness can cost more in a bad year. Original Medicare plus Medigap costs more in premiums every month but caps your exposure predictably. Run both through a healthy-year and a serious-illness-year scenario — our Medigap vs. Medicare Advantage cost comparison and side-by-side coverage guide do exactly that.

When do I have to start paying for Medicare? Premiums generally begin at 65 unless you’re still covered by active employer insurance, in which case you can often delay Part B without penalty. Getting the timing wrong triggers lifelong late-enrollment penalties, so review the Medicare enrollment periods and the rules for working past 65 before your birthday.

Can I use my HSA to pay these costs once I’m on Medicare? Yes. You can’t contribute to an HSA once you enroll in Medicare, but you can spend the balance tax-free on Part B, Part D, and Medicare Advantage premiums (not Medigap), plus deductibles, copays, dental, vision, and hearing. It’s one of the most tax-efficient ways to fund retirement healthcare — see HSAs and Medicare.

What happens to my healthcare costs if I run out of money for long-term care? Medicaid becomes the backstop. Once you spend down to your state’s asset limit, Medicaid covers nursing-home and (in many states) in-home custodial care that Medicare won’t. Advance Medicaid planning can protect some assets for a healthy spouse, but the rules have a five-year look-back, so it has to be done well before care is needed.

Sources

• Medicare.gov — Medicare costs
• CMS.gov — 2026 Medicare Parts A & B premiums and deductibles (fact sheet)
• SSA.gov — Medicare premiums for higher-income beneficiaries (IRMAA)
• Medicare.gov — Medicare Savings Programs
• IRS.gov — Publication 969: Health Savings Accounts

All sources are official government or nonprofit consumer resources, verified July 2026. Medicare and Social Security rules and dollar amounts change annually — confirm current figures at the links above before making decisions.