Plan for healthcare costs in retirement — understand Medicare gaps, long-term care, and how to model medical inflation in your retirement budget.
Published: March 1, 2026
Fidelity estimates a 65-year-old couple retiring in 2024 needs approximately $315,000 for healthcare expenses throughout retirement.
This figure covers Medicare premiums, co-pays, deductibles, and prescription drugs — but excludes long-term care.
Breaking it down: Medicare Part B premiums (~$175/month in 2024), Part D drug coverage (~$55/month), Medigap supplemental insurance (~$150–300/month), plus out-of-pocket costs.
Healthcare inflation runs 5–7% annually — roughly double general inflation — making it the fastest-growing expense in most retirement budgets.
Medicare covers hospital stays (Part A), doctor visits (Part B), and prescriptions (Part D), but has significant gaps in dental, vision, hearing, and long-term care.
Part A: Hospital insurance — most people pay no premium but face deductibles ($1,632 per benefit period in 2024).
Part B: Medical insurance — covers 80% of approved services after the deductible.
Part D: Prescription drug coverage — varies by plan with coverage gaps.
Not covered: routine dental, vision, hearing aids, most long-term care, and care outside the US. These gaps can cost $5,000–15,000+ annually.
Medigap (supplemental) policies fill some gaps but add $150–300/month in premiums.
Use a separate, higher inflation rate (5–6%) for healthcare costs rather than applying general inflation (2–3%) to your entire budget.
The mistake most retirees make: applying one inflation rate to all expenses. Healthcare costs have grown at 5.5% annually over the past 20 years versus 2.5% for general CPI.
In your retirement model:
By age 85, healthcare often represents 30–40% of total spending, up from 15% at age 65.
The median cost of a private nursing home room exceeds $108,000/year — and 70% of people turning 65 will need some form of long-term care.
Long-term care options and median 2024 costs:
Funding strategies:
The worst strategy is ignoring it entirely — which is what most people do.
Ideally in your 50s. This gives you time to build an HSA, evaluate long-term care insurance, and adjust your retirement savings target to account for medical expenses.
Yes — HSAs offer triple tax advantages and funds roll over indefinitely. After age 65, you can withdraw for any purpose (taxed as income) or use tax-free for qualified medical expenses.
You'll need to bridge the gap with COBRA (up to 18 months), ACA marketplace insurance, or a spouse's employer plan. Budget $500–1,500/month per person for pre-Medicare coverage.