How Much Will Healthcare Cost You in Retirement?
Healthcare may be one of the largest expenses you’ll face in retirement. According to Fidelity, a 65-year-old retiring today may spend an average of $172,500 on healthcare costs throughout retirement, and that estimate does not include long-term care. Understanding what Medicare covers, what it doesn’t, and how these expenses fit into your retirement plan may help you avoid costly surprises later in life.
Key Takeaways
- A 65-year-old retiring today may spend an average of $172,500 on healthcare costs in retirement, and that figure does not include long-term care.
- Healthcare costs have historically risen faster than general inflation, making them a growing threat to retirement savings.
- Medicare helps cover many medical expenses, but it does not pay for most dental care, vision care, hearing aids, or long-term care.
- Nearly 70% of older adults will need some form of long-term care, which can cost tens of thousands of dollars per year.
- Healthcare should be part of your retirement savings plan – not an afterthought.
Why Healthcare Costs in Retirement Are Bigger Than Most People Think
Healthcare costs are often one of the most overlooked expenses in retirement planning. While many people focus on replacing income, fewer account for rising medical expenses, Medicare gaps, and the possibility of needing long-term care.
According to Fidelity’s 2025 Retiree Health Care Cost Estimate, a 65-year-old retiring today may spend an average of $172,500 on healthcare and medical expenses throughout retirement. That’s up more than 4% from just a year ago. [1]
And that estimate only covers Medicare premiums, co-payments, and prescription drug costs. It does not include dental, vision, over-the-counter medications, or long-term care.
The real number could be significantly higher.
What Does Retirement Healthcare Really Cost?
Most retirement healthcare costs come from Medicare premiums, prescription drugs, out-of-pocket medical expenses, and long-term care. Long-term care is often the largest expense because it is generally not covered by Medicare.
Let’s break it down to help you understand what you’re looking at.
Medicare Premiums, Co-Pays, and Deductibles
Medicare does help, but it doesn’t cover everything.
Even with Medicare, you’re still responsible for Part B premiums (doctor and outpatient services), Part D premiums (prescription drugs), deductibles, and co-insurance.
According to Fidelity’s research, Medicare Part B and Part D premiums alone make up about 44% of total retirement healthcare costs. [1]
That’s nearly half the bill – just in premiums.
Prescription Drug Costs
Prescription drugs account for roughly 9% of total retirement healthcare costs, according to Fidelity. [1]
But the actual out-of-pocket impact depends heavily on what medications you need, and that can change fast.
Starting in 2025, Medicare introduced a hard cap on out-of-pocket prescription drug costs under Part D.
In 2026, that cap is $2,100. Once you hit that limit, your plan covers 100% of your covered prescriptions for the rest of the year. [2]
Medicare also negotiated lower prices on 10 high-cost drugs for the first time in 2026, with out-of-pocket costs for those medications expected to drop by about 50% on average compared to 2025. [2]
But here’s the catch: The $2,100 cap only applies to drugs covered under Medicare Part D.
Medications administered in a clinical setting, like many cancer treatments covered under Part B, are not subject to the cap and may still result in out-of-pocket costs. [2]
If you develop a serious illness in retirement, drug costs alone may still be devastating.
What Medicare Does NOT Cover
This is where most people get caught off guard.
Medicare generally does not cover routine dental care, vision care, hearing aids, most over-the-counter medications, or long-term custodial care. [1]
These are expenses you will most likely pay entirely out-of-pocket.
The Hidden Cost Most People Miss: Long-Term Care
Long-term care is the part of retirement no one likes to talk about. It may also be the most expensive.
Most people assume Medicare covers it. It doesn’t. [3]
Someone turning 65 today has almost a 70% chance of needing some type of long-term care services at some point in their remaining years. For women, the average duration of care needed is 3.7 years. [3]
Think about that. Nearly 7 in 10 of us will need this kind of care, and most of us have nothing set aside for it.
The costs are sobering.
Here are the national median annual costs, according to CareScout’s 2025 Cost of Care Survey:
- Home health aide (non-medical caregiver): ~$80,080/year
- Assisted living: ~$74,400/year
- Nursing home (semi-private room): ~$114,975/year
- Nursing home (private room): ~$129,575/year [4]
One year in a nursing home could wipe out decades of savings.
Medicaid may help, but only after you’ve spent down most of your own assets first. [3]
Long-term care is a real risk, and most retirement plans don’t account for it.
Why Living Longer Makes This Problem Bigger
People are living longer than ever. That’s mostly good news, but it comes with a financial catch.
According to the Social Security Administration, a 65-year-old today has a remaining life expectancy of approximately 19.8 years on average – 18.5 years for men and 21 years for women. [5]
For married couples, there is a 53% chance that at least one spouse will live past 90, and a 22% chance one will reach 95. [5]
More years of retirement means more years of healthcare costs.
There’s another factor worth understanding: The gap between lifespan and healthspan.
Lifespan is how long you live.
Healthspan is how many of those years you spend in good physical and cognitive health.
Research from LIMRA suggests that the gap may be as large as 10 to 12 years for many Americans – meaning a large stretch of retirement may involve managing chronic illness or disability. [6]
More than three-quarters of U.S. adults live with at least one chronic condition. More than half have two or more. [6]
Cardiovascular disease affects more than half of adults over age 40. [6]
Roughly 40% of Americans will develop cancer during their lifetime, with diagnosis most common around retirement age. [6]
And the risk of cognitive decline rises sharply with age.
According to the Alzheimer’s Association’s 2026 Facts and Figures report, an estimated 7.4 million Americans age 65 and older are living with Alzheimer’s – about 1 in 9 people in that age group. [7]
The lifetime risk at age 45 is 1 in 5 for women and 1 in 10 for men. [7]
Research from the LIMRA Retirement Income Institute found that healthcare costs and long-term care expenses consistently rank as consumers’ top financial threat in retirement – above market declines, recessions, and inflation. [6]
5 Ways to Plan for Healthcare Costs in Retirement
Here’s the good news: Planning early, even imperfect planning, is far better than not planning at all. Here’s where we suggest you start.
#1 Build Healthcare into Your Retirement Number
Most people estimate their retirement needs based on living expenses: housing, food, travel, and utilities.
Healthcare is rarely included.
That can be a big mistake.
If you’re saving toward a $1 million retirement goal, recognize that $172,500 or more of that may go toward healthcare alone – and that’s before long-term care. [1]
That can significantly change how much you need to save, and when you need to start.
#2 Maximize Your HSA If You’re Eligible
A Health Savings Account (HSA) is one of the most tax-advantaged tools available for retirement healthcare costs.
Here’s how it works: Contributions go in pre-tax, the money grows tax-free, and withdrawals for qualified medical expenses come out tax-free. That’s a triple tax advantage that no other savings account offers. [1]
After age 65, you can also use HSA funds for non-medical expenses and simply pay ordinary income tax – making it function almost like a traditional IRA.
If you have access to an HSA through a high-deductible health plan, it may be worth prioritizing.
#3 Understand What Medicare Covers and What It Doesn’t
Don’t wait until you’re 64 to understand Medicare. The earlier you understand the gaps, the more time you have to plan around them.
Take time now to learn the difference between Medicare Parts A, B, C, and D.
Understand what supplemental coverage (Medigap) does and whether a Medicare Advantage plan might make sense for you.
Knowing the gaps ahead of time can help you plan for them, instead of being surprised by a bill.
#4 Factor Long-Term Care into Your Plan
Most people don’t plan for long-term care until they need it. By then, the options are limited, and the costs are already piling up.
Even a basic conversation with your spouse, your family, or a financial advisor about how you’d handle a long-term care need is a valuable step.
Some people save earmarked funds.
Others explore long-term care insurance.
The right answer is different for everyone.
But doing nothing and hoping it won’t happen isn’t a plan.
#5 Review Your 401(k) Strategy with Healthcare in Mind
Your 401(k) is likely your primary retirement savings vehicle.
It needs to be positioned to last…and that means accounting for healthcare inflation, not just general inflation.
Working with a professional to review your 401(k) allocation, contribution rate, and withdrawal strategy – with healthcare costs in mind – may make a meaningful difference in how long your savings last.
Can Your 401(k) Cover Healthcare Costs in Retirement?
For most people, the 401(k) is the foundation of everything in retirement, including how you’ll handle healthcare costs that Medicare doesn’t cover.
The question isn’t just, “How much do I need to retire?”
A better question may be, “How much do I need to retire and cover healthcare costs for 20 or 30 years?”
Those are typically very different numbers.
And knowing the difference now, while you still have time to adjust, may be the most important financial move you make.
Have questions or concerns about your 401(k) performance? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.
Sources
[1] Fidelity Investments. 2025 Retiree Health Care Cost Estimate. July 30, 2025. https://newsroom.fidelity.com/pressreleases/fidelity-investments–releases-2025-retiree-health-care-cost-estimate–a-timely-reminder-for-all-gen/s/3c62e988-12e2-4dc8-afb4-f44b06c6d52e
[2] CNBC. Medicare prescription drug costs may change in 2026 — what beneficiaries need to know. December 3, 2025. https://www.cnbc.com/2025/12/03/medicare-prescription-drug-cost-changes.html
[3] U.S. Department of Health and Human Services. LongTermCare.gov. https://longtermcare.acl.gov
[4] CareScout (Genworth). 2025 Cost of Care Survey. Released March 2, 2026. https://investor.genworth.com/news-events/press-releases/detail/1054/carescout-releases-2025-cost-of-care-survey-results
[5] Social Security Administration. Actuarial Note 2025.2 – Period Life Expectancy. June 2025. https://www.ssa.gov/oact/NOTES/ran2/an2025-2.pdf
[6] LIMRA Retirement Income Institute. Health-Related Costs are the Greatest Threat to Retirement Security, New Research Finds. April 6, 2026. https://www.limra.com/en/newsroom/news-releases/2026/health-related-costs-are-the-greatest-threat-to-retirement-security-new-research-finds/
[7] Alzheimer’s Association. 2026 Alzheimer’s Disease Facts and Figures. 2026. https://www.alz.org/alzheimers-dementia/facts-figures
