The average cost of healthcare in retirement is one of the few expenses you can estimate years ahead of time—and one of the most consistently underestimated. Fidelity Investments' widely cited 2024 Retiree Health Care Cost Estimate puts the figure at roughly $165,000 for a 65-year-old couple, and that number covers premiums only, not long-term care.
The problem is that most retirement budgets treat medical costs as a rounding error when they often become the second-largest line item after housing. This guide breaks the number down by component, shows where Medicare stops and your wallet starts, and gives you concrete steps to plan for the gap.
What the Headline Number Actually Covers
The headline figure is a starting point, not a full picture, because it counts Medicare premiums and some out-of-pocket costs but excludes most long-term care. Fidelity's estimate assumes a couple enrolled in traditional Medicare plus a supplemental Medigap plan and a Part D drug plan.
It does not include dental, vision, hearing aids, or nursing home care—categories that can add tens of thousands of dollars on their own. Single retirees should expect a smaller but still substantial figure, generally estimated in the low-to-mid six figures depending on age and health at retirement.
Understanding the average cost of healthcare in retirement means separating three buckets: premiums, routine out-of-pocket spending, and catastrophic or long-term care.
- Premiums: Medicare Part B, Part D, Medigap, and any Advantage plan copays
- Routine out-of-pocket: dental, vision, hearing, and non-covered drugs
- Long-term care: home aides, assisted living, or nursing home stays
A practical tip: pull your current health insurance statements and tally your actual annual spend, then project it forward with a conservative inflation rate. Medical costs have historically risen faster than general inflation, so a 4–5% annual assumption is more realistic than 2–3%.
Why the Number Keeps Rising
Medicare trustees have repeatedly warned that the program's long-term financing faces pressure, and premiums tend to climb annually. The Centers for Medicare & Medicaid Services publishes the official premium and spending projections each year, which is the most reliable place to track the trend.
Planning on today's premiums without an inflation buffer is the most common mistake, and it is exactly what pushes the average cost of healthcare in retirement higher every year.
Breaking Down the Annual Cost by Component
Annual spending matters more than the lifetime total for budgeting purposes, because you pay it month by month. A reasonable planning range for a healthy couple on traditional Medicare plus Medigap is often cited in the high four figures to low five figures per year, before any long-term care.
A single enrollee typically faces a somewhat lower but still meaningful annual figure.
The average cost of healthcare in retirement varies enormously by plan choice, so compare the structure rather than a single number.
| Component | What it covers | Action to take |
|---|---|---|
| Medicare Part B | Doctor visits, outpatient care | Check your IRMAA bracket on your tax return |
| Medigap | Gaps in Parts A and B | Compare Plan G vs. Plan N rates in your state |
| Part D | Prescription drugs | Use Medicare's plan finder to price your actual drugs |
| Dental/Vision | Not covered by Medicare | Budget separately or buy a standalone policy |
| Long-term care | Home care, assisted living | Research hybrid life/LTC policies before age 65 |
The table above is the fastest way to see where your money actually goes. A common scenario: a retiree budgets for Part B and drug coverage but forgets that Medigap premiums alone can run several hundred dollars a month depending on age and location.
The Income-Related Surcharge Trap
Higher-income retirees pay more through IRMAA, an income-related surcharge added to Part B and D premiums. Because it's based on tax returns from two years prior, a one-time spike like selling a rental property can raise your premiums unexpectedly.
Check your projected modified adjusted gross income before large Roth conversions or asset sales, since a single spike can lift your average cost of healthcare in retirement for an entire year.
How Medicare Changes the Math at 65
Turning 65 reshapes your spending, but it doesn't eliminate it—Medicare covers a large share, not all, of medical bills. Original Medicare generally pays about 80% of approved costs for covered services after the deductible, leaving the remaining 20% to you unless you carry supplemental coverage.
That coinsurance gap is precisely why Medigap exists, and why the average cost of healthcare in retirement is higher than many pre-retirees expect.
Three decisions drive most of the variance:
- Original Medicare plus Medigap — higher premiums, predictable costs, broad provider access
- Medicare Advantage — lower premiums, more copays, network restrictions
- Employer retiree coverage — increasingly rare, but worth confirming before you enroll elsewhere
A practical tip: if you're still working past 65 and covered by an employer plan, confirm with your benefits administrator whether you should delay Part B to avoid lifetime late-enrollment penalties.
The Late-Enrollment Penalty
The Medicare.gov enrollment guidance explains that missing your Initial Enrollment Period can trigger permanent premium penalties for Part B and Part D. Set a calendar reminder for three months before your 65th birthday, because those penalties follow you for life and quietly inflate the average cost of healthcare in retirement.
Long-Term Care: The Cost Most Estimates Leave Out
Long-term care is the wildcard that can dwarf every other healthcare expense. According to Genworth's Cost of Care Survey, a private room in a nursing home runs well over $100,000 per year nationally, and home health aide rates have climbed sharply in recent years.
Medicare generally does not cover custodial long-term care, and Medicaid only kicks in after assets are largely spent down.
That reality means the average cost of healthcare in retirement for someone who needs years of care can be several times the standard estimate. Planning options include self-funding with a dedicated bucket, a traditional long-term care policy, or a hybrid life insurance policy with an LTC rider.
Start the Conversation Early
Families often discover care costs only after a health crisis. Discuss preferences for home care versus facility care while everyone is healthy, and price local options in your area.
The Administration for Community Living maintains an elder care locator that can help you find local resources and costs, which gives you a realistic local anchor for the average cost of healthcare in retirement.
Building a Realistic Healthcare Budget
A realistic budget starts with your actual numbers, not a national average. Track one full year of medical spending—premiums, copays, prescriptions, dental, vision, and any out-of-network costs—then add a buffer for inflation and a separate reserve for long-term care risk.
The average cost of healthcare in retirement is a benchmark, but your personal health history and family longevity should adjust it up or down.
Consider using a Health Savings Account if you're still working and eligible. HSAs offer a rare triple tax advantage, and funds can be invested and used tax-free for qualified medical expenses in retirement—one of the most efficient tools for pre-funding healthcare costs.
Stress-Test Your Plan
Run three scenarios: healthy, moderate chronic conditions, and a long-term care event. If your plan survives all three without draining your portfolio, you're in good shape, and you'll have a far clearer picture of your own average cost of healthcare in retirement than any national figure can provide.
Frequently Asked Questions About average cost of healthcare in retirement
How much should a single person budget for healthcare in retirement?
Single retirees typically need less than couples but still face substantial costs, often estimated in the low-to-mid six figures over a 20-plus year retirement. The exact figure depends on your plan choice and health.
If you have chronic conditions requiring specialists or expensive drugs, budget higher than the standard estimate and check Part D formulary coverage carefully before choosing a plan.
A single person's average cost of healthcare in retirement often reaches the low-to-mid six figures across twenty-plus years. Your exact total hinges on plan choices, health status, and where you live.
The average cost of healthcare in retirement usually excludes dental, vision, and hearing, so budget for those separately.
Does the average cost of healthcare in retirement include dental and vision?
No—most headline estimates exclude dental, vision, and hearing. Medicare generally doesn't cover routine dental cleanings, eyeglasses, or hearing aids. Budget separately for these, since a single hearing aid pair or major dental work can cost thousands. Some Medicare Advantage plans bundle limited dental and vision benefits, so compare those extras if these services matter to you.
No—the average cost of healthcare in retirement usually excludes dental, vision, and hearing, so budget separately for those gaps.
What happens to healthcare costs if I retire before 65?
You must bridge the gap to Medicare, usually through an ACA marketplace plan, COBRA, or a spouse's coverage. Marketplace premiums can be substantial without subsidies, so price plans on HealthCare.gov before you retire early. The average cost of healthcare in retirement climbs noticeably when you add several years of pre-Medicare coverage to the total.
Can I use an HSA to pay Medicare premiums?
Yes—you can use HSA funds tax-free to pay Medicare Part B, Part D, Medicare Advantage, and qualified long-term care premiums. You cannot use them for Medigap premiums. This makes an HSA a powerful tool for managing the average cost of healthcare in retirement, especially if you contribute and invest early and let the balance grow for decades.
How often should I revisit my healthcare cost estimate?
Revisit it annually, and always after a major life event like a health diagnosis, a move to a new state, or a change in income. Premiums, plan offerings, and IRMAA thresholds shift yearly. A quick annual review keeps your estimate aligned with the real average cost of healthcare in retirement for your situation.
Conclusion
Healthcare is a budget line you can plan for—but only if you treat it as a major expense rather than an afterthought.
- Premiums are only part of the story: the standard estimate excludes dental, vision, hearing, and long-term care
- Inflation matters: medical costs historically outpace general inflation, so build in a buffer
- Plan choices drive variance: Medigap versus Medicare Advantage changes your cost profile significantly
- Long-term care is the biggest wildcard: price local options and consider insurance or a dedicated reserve
Take one action this week: gather last year's medical spending and project it forward with a 5% inflation assumption. That single exercise will make the average cost of healthcare in retirement concrete for your household—and give you a number you can actually plan around.
