Planning for Health Care Expenses in Retirement

This article is part of the Biblically-Informed Framework for Retirement Stewardship (BIFRS) series. It was originally published September 12, 2016 and updated in March 2026.

When I first wrote this article in 2016, I was 63 years old and still three years away from Medicare eligibility. Healthcare costs were theoretical—something I needed to plan for but hadn’t yet experienced firsthand.

Now, in 2026, my wife and I have been on Medicare for more than eight years. We’ve navigated the enrollment process, chosen our plans, lived with the monthly premiums, dealt with the deductibles and co-pays, and experienced the reality of healthcare costs in retirement.

The good news is that the estimates I provided in 2016 proved remarkably accurate. Healthcare is indeed one of our largest retirement expenses, but careful planning made it manageable rather than catastrophic.

The article below has been updated with 2026 costs and data, but the fundamental principles remain the same: Healthcare expenses in retirement are significant, predictable, and require intentional planning. The difference is that now I’m writing from experience, not just research.

I’ve discussed Medicare and other health insurance options in retirement. One of the big myths about Medicare is that it pays for everything. Well, it doesn’t—nor does any other plan. In almost all cases, you will be responsible for premiums, co-pays, deductibles, and other out-of-pocket expenses, depending on your plan’s provisions.

Wise retirement stewardship includes planning for medical expenses in retirement. We trust God and pray for good health, but it isn’t guaranteed…

Beloved, I pray that all may go well with you and that you may be in good health, as it goes well with your soul. (3 John 2, ESV)

Because we don’t know what our health will be year by year, healthcare costs are a major wild card in retirement expense planning and budgeting. Healthcare will certainly be one of the largest expenses for retirees and will vary significantly from person to person, as everyone’s situation is different.

Your current health (and healthcare expenses) is a good indicator of what your future expenses might be. If you have a chronic condition requiring regular medications, treatment, or doctor visits, or certain high-risk factors, your costs may be on the high side. If you’ve neglected your health (poor diet, lack of exercise, etc.), now is a good time to make a fresh start—it may pay dividends as you age.

The healthcare cost reality

Let me start with the big picture, because understanding the total lifetime cost helps put the monthly and annual expenses in perspective.

According to Fidelity’s most recent estimates, a 65-year-old couple retiring in 2025 can expect to spend approximately $315,000 on healthcare costs throughout retirement. That’s up significantly from the $245,000 estimate when I first wrote this article in 2016—a 28.5% increase over nine years.

Think about what $315,000 represents:

• For a couple with $500,000 saved: 63% of their entire retirement portfolio
• For a couple with $1 million saved: 31.5% of their portfolio
• For a couple with $2 million saved: 15.75% of their portfolio

After eight years of paying Medicare premiums, Medigap premiums, Part D premiums, deductibles, co-pays, dental work, vision care, and unexpected medical expenses, I can confirm that these estimates are realistic. Some years we’ve spent less, some years more (depending on whether we needed significant dental work or had unexpected health issues), but it averages out to approximately what Fidelity projected.

The keyword is “planning.” Healthcare costs didn’t surprise us or derail our retirement because we budgeted for them from day one.

Expense categories

To help you plan, here’s a breakdown of the major medical expense categories you need to consider:

1. Medicare Part B premiums

Medicare Part B (medical insurance covering doctor visits, outpatient care, preventive services, etc.) is not free. Everyone pays a monthly premium, deducted automatically from your Social Security check if you’re receiving benefits.

As of 2026, the standard premium for Part B is $185.00 per person per month. However, if your income exceeds certain thresholds, you’ll pay more through IRMAA (Income-Related Monthly Adjustment Amount). IRMAA is based on your Modified Adjusted Gross Income (MAGI) from two years prior, so your 2026 premium is based on your 2024 tax return.

2026 IRMAA Brackets (Individual / Married Filing Jointly):

• ≤$106,000 / ≤$212,000: Standard $185.00/month
• $106,001-$133,000 / $212,001-$266,000: $259.00/month
• $133,001-$167,000 / $266,001-$334,000: $369.90/month
• $167,001-$200,000 / $334,001-$400,000: $480.80/month
• $200,001-$500,000 / $400,001-$750,000: $591.70/month
• $500,000 / >$750,000: $628.90/month

For a couple at standard rate: $185 x 2 = $370/month or $4,440/year

We’ve paid the standard $185/month rate since enrolling, as our retirement income keeps us below the first IRMAA threshold. However, if we had done large Roth conversions or had other major taxable events, we would have received IRMAA notices two years later. This is why tax planning in retirement matters—it’s not just about federal tax rates, but also about Medicare premiums.

2. Medicare Part A premiums (if applicable)

Most people don’t pay Part A premiums if they (or their spouse) paid Medicare taxes for at least 10 years (40 quarters). However, if you have fewer quarters:

• 30-39 quarters of coverage: $285/month
• Fewer than 30 quarters: $518/month

Most retirees will have $0 Part A premiums, but it’s worth verifying your work history.

3. Medicare Supplement Insurance (Medigap)

Medicare Parts A and B cover a lot, but they have significant gaps. Part A requires you to pay a deductible ($1,676 in 2026) for each benefit period, plus co-insurance for extended hospital stays. Part B typically pays 80% of approved charges after you meet the annual deductible ($257 in 2026), leaving you responsible for the other 20%—and there’s no annual out-of-pocket maximum with Original Medicare.

This is why most people on Original Medicare purchase a Medigap (Medicare Supplement) policy from a private insurance company.

Currently (2026), the most popular Plan in 2026 is Plan G. My wife and I have Plan F, which was the most comprehensive, but it is no longer available to those who became Medicare-eligible after January 1, 2020.

Plan G covers:

• Part B excess charges
• Part A co-insurance and hospital costs
• First 3 pints of blood
• Part A hospice co-insurance
• Skilled nursing facility co-insurance
• Part A deductible
• Foreign travel emergency care

Plan G does NOT cover:

• Part B deductible ($257 in 2026) – you pay this once per year

2026 Medigap Plan G Typical Costs:

• Age 65: $125-$180/month
• Age 70: $150-$200/month
• Age 75: $175-$230/month
• Age 80: $195-$260/month

(Rates vary significantly by state, zip code, gender, tobacco use, and pricing method: “attained age,” “issue age,” or “community-rated.”)

Note: Some Medigap policies increase premiums as you age (“attained age” pricing), while others lock in your rate based on your age when you enrolled (“issue age” pricing). Ask which type you’re getting.

For a couple both age 73: Approximately $175 x 2 = $350/month or $4,200/year

Our Plan F premiums have increased gradually each year, but the coverage has remained excellent. I never have to pay a deductible and virtually all our medical expenses are covered. We don’t worry about surprise bills or hitting spending limits. For us, the slightly higher monthly premiums are worth the predictability and peace of mind.

4. Medicare Part D prescription drug coverage

Part D is provided by private insurance companies and covers prescription medications. It’s optional but highly recommended—there’s a permanent late-enrollment penalty if you delay without creditable coverage.

2026 Typical Costs:

• Average premium: $40-$70/month (varies by plan, location, and coverage)
• Annual deductible: Up to $590 (many plans have $0 or reduced deductibles)
• IRMAA surcharges: $13.70 to $86.90/month added to the premium if income exceeds thresholds

Coverage gap (“donut hole”): After you and your plan spend $5,030 in 2026, you enter a coverage gap where you pay 25% of drug costs until you reach $8,000 in out-of-pocket spending. Then catastrophic coverage kicks in (5% or small co-pays).

For a couple: Approximately $50 x 2 = $100/month or $1,200/year

Plus: Prescription co-pays throughout the year (varies widely based on medications and plan formulary)

Every year during the Annual Enrollment Period (October 15-December 7), you can use Medicare.gov’s Plan Finder tool to compare Part D plans based on your actual prescriptions. Plans change their formularies, pricing tiers, and pharmacy networks annually, so what was the best plan last year may not be this year.

This annual review takes about an hour but can save you hundreds of dollars by ensuring we’re in the most cost-effective plan for our specific medications.

5. Medicare Deductibles and Co-pays

Even with Medigap coverage, you’ll have some out-of-pocket costs:

Part A (Hospital Insurance) – 2026:

• Deductible: $1,676 per benefit period
• Days 1-60: $0 co-insurance (after deductible)
• Days 61-90: $419/day co-insurance
• Days 91-150 (Lifetime Reserve Days): $838/day co-insurance
• Beyond 150 days: You pay all costs

(Medigap Plan G covers most of these costs)

Part B (Medical Insurance) – 2026:

• Annual deductible: $257 (you pay this)
• After deductible: Typically 20% of Medicare-approved amounts

(Medigap Plan G covers the 20% co-insurance but NOT the $257 deductible)

Skilled Nursing Facility Co-insurance:

• Days 1-20: $0
• Days 21-100: $209.50/day
• Beyond 100 days: You pay all costs

6. Dental, Vision, and Hearing Care

These categories are generally not covered by Original Medicare or most Medigap plans, and you may pay 100% out of pocket.

Typical annual costs (2026):

• Routine dental cleanings/exams: $200-400 per person
• Dental work (fillings, crowns, root canals): $500-5,000+ depending on needs
• Vision exams: $100-200
• Glasses or contacts: $200-600
• Hearing aids: $2,000-6,000 per pair (needed every 5-7 years)

Optional supplemental insurance:

• Dental insurance: $25-50/month per person
• Vision insurance: $15-30/month per person

Many people on Original Medicare purchase standalone dental and vision policies, though the premiums often don’t save much money unless you have significant needs. For routine care, paying out of pocket is sometimes more cost-effective.

We budget $2,000- $ 3,000 per year for dental and vision care combined. Some years we spend less (just routine cleanings and exams), other years more (when we need dental work or new glasses).

These “extras” that Medicare doesn’t cover add up, so they need to be in your budget.

Updated cost estimate (2026)

Here’s what healthcare costs look like as a couple in 2026:

Monthly Premiums:

Annual Out-of-Pocket Costs:

• Part B deductibles (both): $257 x 2 = $514
• Prescription co-pays: $1,000-2,000
• Dental care: $500-2,000
• Vision care: $200-500
• Annual OOP Total: $2,200-5,000

Total Annual Healthcare Budget: $12,000-15,000

In 2016, I estimated that a couple would pay approximately $10,440/year in premiums alone. In 2026, actual premiums are $9,840—slightly less than I projected, though out-of-pocket costs have increased somewhat.

The point is this: healthcare costs are predictable enough to budget for. They’re significant, but they shouldn’t be a surprise.

What will it cost you?

Your Medicare costs may be very close to what I estimated above, depending on the plans you select for Parts D and Medigap. I used middle-of-the-road numbers, so yours could be higher or lower.

However, a few factors could significantly increase your costs:

You’ll pay MORE if:

• Your income triggers IRMAA surcharges (can add $1,000-10,000+ annually for a couple)
• You choose a more comprehensive Medigap plan or premium pricing
• You take expensive medications not well-covered by your Part D plan
• You need significant dental work, hearing aids, or vision correction
• You have chronic conditions requiring frequent specialist visits
• You choose Medicare Advantage with high out-of-pocket maximums

You might pay LESS if:

• You choose a $0-premium Medicare Advantage plan instead of Original Medicare + Medigap
• You’re very healthy with minimal medication needs
• You qualify for Medicare Savings Programs (if low income)
• You have supplemental coverage from a former employer

One thing is certain: Health insurance and care are going to be a significant expense in retirement, so you need to plan accordingly.

The chart below from HealthView Insights shows how healthcare costs typically increase throughout retirement. Note that these are inflation-adjusted future dollars:

Average Annual Healthcare Costs by Age (Couple, Future Dollars):

• Ages 65-69: $15,000-18,000
• Ages 70-74: $18,000-22,000
• Ages 75-79: $22,000-27,000
• Ages 80-84: $27,000-33,000
• Ages 85+: $33,000-40,000+

Healthcare costs increase not just with general inflation, but also because we typically need more care as we age.

How much should you save?

According to a report by the Employee Benefit Research Institute (EBRI), here’s how much a 65-year-old needs saved specifically for healthcare expenses to have different levels of confidence:

For 50% probability of covering healthcare costs:

• Men: $68,000-88,000
• Women: $89,000-116,000 (due to longer life expectancy)

For 90% probability of covering healthcare costs:

• Men: $124,000-161,000
• Women: $140,000-182,000

These amounts are for healthcare only—not your entire retirement nest egg. They represent the portion of your savings that should be earmarked specifically for Medicare premiums, out-of-pocket costs, and healthcare expenses.

From the perspective of total lifetime costs, Fidelity’s $315,000 estimate for a healthy 65-year-old couple is the median scenario. Some couples will spend less (if they have shorter lifespans or fewer health issues), others will spend significantly more (if they live into their 90s with chronic conditions).

If you want a 90% probability of covering healthcare costs throughout a 25-30 year retirement, you should plan on having $300,000-350,000 specifically set aside for healthcare expenses as a couple. For most of us, that will be part of an IRA, 401(k), or annuity. It can also be partially funded from income and dividends from the same sources as costs arise.

Action steps

Planning for healthcare expenses doesn’t have to be overwhelming. Here are specific steps you can take:

If you’re still working (pre-Medicare):

1. Educate yourself about Medicare

Don’t wait until age 64 to start learning about Medicare. Begin researching:

• Parts A, B, C, D, and what they cover
• Medigap vs. Medicare Advantage decision
• Enrollment periods and late penalties
• How it coordinates with employer coverage if you work past 65

2. Maximize Health Savings Account (HSA) contributions

If you have a high-deductible health plan (HDHP), you’re eligible for an HSA—one of the best retirement savings vehicles available.

2026 HSA Contribution Limits:

• Individual: $4,300
• Family: $8,750
• Age 55+ catch-up: Additional $1,000

Triple tax advantage:

• Tax deduction on contributions
• Tax-free growth
• Tax-free withdrawals for qualified medical expenses

Once you enroll in Medicare, you can no longer contribute to your HSA, but you can use the accumulated funds tax-free for Medicare premiums (except Medigap), out-of-pocket costs, dental, vision, hearing aids, and long-term care insurance premiums.

3. Build healthcare costs into retirement budget projections

When calculating “How much do I need to retire?”, include realistic healthcare costs:

• Minimum $12,000-15,000/year for a couple
• More if you have chronic conditions or plan to retire before 65
• Account for healthcare inflation (typically 5-6% annually)

4. If retiring before 65, plan for the coverage gap

You need healthcare coverage from retirement until Medicare eligibility at 65. Options include:

• COBRA (expensive: often $700-1,500/month per person)
• ACA Marketplace (premiums vary, subsidies available based on income)
• Spouse’s employer plan
• Private insurance

Cost example: Retiring at 62 means 3 years until Medicare. At $1,000/month per person, that’s $72,000 for a couple—this needs to be in your retirement plan.

If you’re within 2 years of Medicare:

1. Mark your Initial Enrollment Period (IEP) on your calendar

Your IEP is 7 months: 3 months before your 65th birthday month, your birthday month, and 3 months after.

2. Decide on Part B timing

If you (or your spouse) have employer coverage from a company with 20+ employees, you can delay Part B enrollment without penalty. Otherwise, enroll during your IEP to avoid the late-enrollment penalty (a 10% increase per 12-month delay, permanent).

3. Research Medigap vs. Medicare Advantage

Visit Medicare.gov and use their plan comparison tools. Get Medigap quotes during your Medigap Open Enrollment Period (6 months after enrolling in Part B) when you have guaranteed issue rights.

4. Compare Part D plans

Use Medicare.gov’s Plan Finder tool with your actual medications to find the most cost-effective Part D plan in your area.

5. Understand IRMAA implications

Review your tax returns from the past few years. If your income puts you near an IRMAA threshold, consider whether Roth conversions, timing of capital gains, or other tax planning could help you avoid or reduce IRMAA surcharges.

If you’re already on medicare:

1. Review your coverage annually (October 15-December 7)

During Annual Enrollment Period:

• Compare Part D plans with your current medications
• Verify doctors are still in-network (if Medicare Advantage)
• Consider whether your plan still meets your needs

2. Budget accurately

Track your actual healthcare spending:

• Monthly premiums
• Annual deductibles
• Prescription co-pays
• Dental/vision/hearing expenses
• Unexpected medical costs

Use this data to adjust your budget for the following year.

3. Watch for IRMAA letters

Social Security sends IRMAA determination letters based on tax returns from 2 years prior. If you disagree (due to a life-changing event like retirement, marriage, or the death of a spouse), you can appeal.

4. Consider sinking fund or dedicated savings

Set aside money each month for healthcare expenses or maintain a separate “healthcare emergency fund” for deductibles and unexpected costs.

5. Keep Medicare statements

Review Medicare Summary Notices for errors. Billing mistakes happen, and you may catch charges for services you didn’t receive.

If you’re helping aging parents:

1. Have “the conversation” about their coverage

Ask what Medicare plans they have, how much they’re paying, and whether they review options annually.

2. Offer to help during Annual Enrollment

Many seniors find the plan comparison process overwhelming. Offer to sit down together and use Medicare.gov’s tools to evaluate options.

3. Watch for confusion or missed bills

Cognitive decline often first shows up in financial management. If you notice missed payments or confusion about insurance statements, it may be time to get more involved.

4. Ensure they have proper legal documents

A healthcare power of attorney and a HIPAA authorization allow you to speak with providers and make decisions if they’re unable to.

Additional planning strategies

Create a “sinking fund” for healthcare

Rather than being surprised by the annual Part B deductible or by unexpected dental work, set aside money each month. If you budget $12,000/year but pay $9,840 in premiums, that leaves $2,160 for out-of-pocket costs—or $180/month to put in a savings account earmarked for healthcare.

Avoid late-enrollment penalties

The penalties for late enrollment in Part B and Part D are permanent and compound over time. Don’t miss your enrollment windows.

Time your Medigap enrollment strategically

Enroll in Medigap during your 6-month Open Enrollment Period when you’re guaranteed acceptance regardless of health. If you wait and develop health issues, you may be denied coverage or charged much higher rates.

Consider geographic location

Healthcare costs vary significantly by state and even by zip code. Some states regulate Medigap pricing more tightly, some have lower Medicare Advantage premiums, and some have better healthcare systems. If you’re planning to relocate in retirement, research healthcare costs in your target area.

Maintain healthy habits

While we can’t control everything about our health, we can influence it. Regular exercise, healthy eating, maintaining social connections, and staying mentally active can reduce healthcare costs over the long term.

The peace that comes from planning

Healthcare costs in retirement are real. They’re significant. They’re not optional. But they’re also predictable enough to plan for.

When I first wrote this article in 2016, I was concerned about healthcare costs. Would Medicare be enough? Could we afford it? What about the unknowns?

Now, after eight years on Medicare, I can tell you: Planning works. We budgeted appropriately. We chose coverage that fit our needs. We set aside money for out-of-pocket costs. And while healthcare is indeed one of our largest expenses, it hasn’t been a crisis. It’s been a manageable, expected part of retirement.

This is stewardship—preparing well so that when we need care (and we all will), we can receive it without creating a financial crisis for ourselves or our families.

Planning isn’t the opposite of faith—it’s the expression of faith in a God who gave us minds to think ahead and wisdom to prepare. As Proverbs 27:12 says, “The prudent see danger and take refuge, but the simple keep going and pay the penalty.”

Healthcare expenses are predictable. Plan for them. Budget for them. And then trust God with what you cannot control.