If you ask most pre-retirees to estimate their biggest expense in retirement, they'll say housing. Or maybe taxes. Some will say travel.
Very few say healthcare.
And yet healthcare is consistently the expense that surprises retirees most — both in scale and in timing. It arrives earlier than expected, costs more than projected, and grows faster than inflation. For couples, it can easily become the largest single expense category in their entire retirement.
Building a realistic healthcare cost projection into your retirement plan isn't pessimistic. It's the difference between a plan that holds together and one that doesn't.
Fidelity's annual Retiree Health Care Cost Estimate puts the average cost for a couple retiring at 65 at approximately $315,000 over the course of retirement — and that figure covers only Medicare premiums, Medicare cost-sharing, and out-of-pocket drug costs. It does not include dental, vision, hearing, or long-term care.
For many people, the actual all-in healthcare cost across a 25 or 30-year retirement is considerably higher.
This is not a reason to panic. It is a reason to plan.
For anyone planning to retire before age 65, there's a healthcare challenge that retirement projections almost never address adequately: the bridge period before Medicare eligibility.
Private health insurance for a couple in their early 60s — through the ACA marketplace or COBRA from a former employer — typically costs between $1,500 and $3,000 per month depending on location, coverage level, and income. That's $18,000 to $36,000 per year in premiums alone, before copays and deductibles.
This is one of the most significant costs in early retirement, and it's one of the most frequently omitted from pre-retirement income planning. If you're planning to retire at 60, 62, or even 64, this gap needs a specific funding strategy.
It also affects how you structure your retirement income during those years — because ACA premium subsidies are income-dependent, and how much income you show on your tax return in early retirement directly affects what you pay for health insurance.
Many pre-retirees assume that once they reach 65 and qualify for Medicare, their healthcare cost problem is solved. It's not — it's just restructured.
Medicare Part B premiums in 2026 start at approximately $185 per month per person, or $2,220 per year. For couples, that's $4,440 annually before a single medical appointment.
IRMAA surcharges: Medicare premiums are income-tested. If your combined income exceeds $212,000 for a married couple, Part B and Part D premiums increase substantially — in some tiers, by more than $400 per person per month. These surcharges are directly tied to your retirement income structure, including the size of your RMDs and any Roth conversions you undertake.
Supplemental (Medigap) coverage: Original Medicare covers approximately 80% of approved costs, leaving a 20% exposure with no out-of-pocket maximum. Most retirees purchase a Medigap supplement policy to cover this gap — typically $150 to $300 per person per month.
Dental, vision, and hearing: Original Medicare covers almost none of these. Separate coverage or out-of-pocket spending is required for routine dental care, glasses or contacts, and hearing aids — costs that become increasingly significant with age.
Added together, a couple's total Medicare-related costs — base premiums, supplements, Part D, dental, and vision — can easily reach $10,000 to $15,000 per year or more, before any medical events occur.
Long-term care — the cost of extended assistance with daily activities, whether in a home, assisted living facility, or nursing home — is the healthcare cost that carries the greatest financial risk.
More than half of Americans turning 65 today will need some form of long-term care during their lifetime. The average cost of a private room in a nursing facility exceeds $100,000 per year. Home health aide costs, while lower, are still substantial and cumulative.
Medicare covers very little of this. Medicaid requires spending down most of your assets to qualify. For married couples, the financial risk is compounded — the cost of caring for one spouse can deplete the assets the other needs to live on.
Long-term care planning is a separate discipline within retirement planning, and it's one that works best when addressed well before care is needed. It is beyond the scope of this article, but it is an essential part of any complete retirement plan.
A retirement income plan that doesn't include specific healthcare cost projections is not complete. Here's what a proper healthcare line item in a retirement plan looks like:
→ A year-by-year projection of pre-Medicare insurance costs if retiring before 65
→ An estimate of annual Medicare-related costs after 65, including IRMAA sensitivity analysis
→ A separate long-term care strategy or funding provision
→ Inflation adjustment — healthcare costs rise faster than general inflation, typically 4–5% per year
→ Integration with income structure — ensuring that income levels in early retirement don't trigger unnecessary premium surcharges
None of this requires a detailed insurance analysis in every planning session. But it does require that healthcare be treated as a named, quantified line item rather than a vague footnote.
Healthcare cost planning is one of the areas where working with an advisor who builds comprehensive retirement income plans — rather than just managing a portfolio — makes the most tangible difference.
It's a conversation we have in every retirement planning consultation. And consistently, it's one of the numbers that changes the overall plan most significantly.
If your current retirement plan doesn't include a specific healthcare cost projection, that's worth addressing now — particularly if you're planning to retire before 65.
📅 Book your complimentary consultation →https://calendly.com/d/cxhw-ysw-34z/initial-complimentary-consultation
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