Cost of Healthcare in Retirement

In this article, we’re sharing four steps you can take to prepare for the high cost of healthcare in retirement.

For most Americans, healthcare is one of the biggest—if not the biggest—expense in retirement. Indeed, the average 65-year-old retired couple may need roughly $315,000 to cover healthcare expenses, according to a 2022 Fidelity report. Depending on your overall health and other factors, your healthcare costs may far exceed this estimate.

Planning for future healthcare expenses is full of unknowns, making it a difficult task. Nevertheless, there are steps you can take as you prepare for retirement to help ensure you don’t deplete your savings prematurely.

To prepare for the high cost of healthcare in retirement, consider the following steps:

#1: Understand What Medicare Does and Doesn’t Cover

Once you and your spouse stop working, Medicare will likely be your primary insurance provider. Unfortunately, many people don’t realize that Medicare doesn’t cover everything.

Parts A & B cover most inpatient hospital care and medically necessary and preventative services. But even if your service is covered, you’ll typically need to pay a deductible, coinsurance, or copayment.

Moreover, Medicare doesn’t cover long-term care, most dental care and dentures, or eye exams related to prescribing glasses. It also doesn’t cover cosmetic surgery, acupuncture, or hearing aids.

You may not need all of these services as you age, but you’ll likely need some. In other words, planning for healthcare in retirement may require you to look for supplemental insurance beyond Medicare.

#2: Avoid IRMAA to Lower the Cost of Healthcare in Retirement

IRMAA, short for income-related monthly adjustment amount, is a surcharge Medicare beneficiaries must pay each month if their income exceeds a certain threshold. This surcharge can meaningfully increase your healthcare costs in retirement if you have too much taxable income.

Fortunately, there are strategies you can leverage to lower your income in retirement and avoid paying IRMAA. For example, you can strategically donate to charity or convert part or all of your traditional retirement account funds to a Roth account.

You may want to consider working with a financial planner who can help you develop a tax-efficient income strategy in retirement. A financial professional can also help you identify other strategies to prepare for the high cost of healthcare in retirement.

#3: Contribute to a Health Savings Account

A health savings account (HSA) can be an effective way to plan for the high cost of healthcare in retirement—if you qualify.

To be eligible for an HSA, you must be covered under a qualified high-deductible health plan (HDHP). You also can’t be currently enrolled in Medicare.

If your employer offers a qualified HDHP, you may want to consider enrolling to take advantage of an HSA. Not only do HSAs offer triple tax savings, but any funds you contribute are yours to use for life.

Here’s how it works:

  • First, you contribute pre-tax dollars to your health savings account.
  • You can then invest the funds you contribute on a tax-deferred basis.
  • Lastly, withdrawals are tax-free, so long as you use them for qualifying medical expenses.

Since an HSA offers similar benefits to an individual retirement account, it can be an efficient way to boost your retirement savings. But keep in mind some of the tax benefits go away if you withdraw funds for non-healthcare-related expenses.

#4: Consider Long-Term Care Insurance

According to, someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and supports in their remaining years. Moreover, PWC estimates that the average lifetime cost of formal long-term care is $172,000.

Thus, you may want to consider buying long-term care insurance to offset the potentially high cost of healthcare in retirement.

Long-term care insurance covers expenses related to everyday personal care assistance—for example, help with activities of daily living such as bathing, dressing, or eating. It also covers assisted living and nursing home care.

Long-term care insurance may be a good option if you don’t have or want to burden family members if you can’t take care of yourself. It also tends to be expensive, and not everyone qualifies. Thus, you may want to consult a financial planner or insurance specialist to determine if long-term care insurance is right for you.

Benchmark Wealth Management Can Help You Plan for the High Cost of Healthcare in Retirement

One of the best ways to prepare for the high cost of healthcare in retirement is to start growing your financial resources now. If you’re not sure how much money you’ll need in retirement, start by creating a budget with realistic estimates of your future medical expenses.

Then, see how your projected healthcare costs compare to your current savings. You may need to increase your savings rate to cover the shortfall or leverage other financial planning strategies.

A trusted financial advisor like Benchmark Wealth Management can help you develop a long-term financial plan that prepares you for retirement and beyond. To see if we may be a good fit for your financial planning needs, please contact us. We’d love to hear from you.

This article is for educational purposes only and is not intended to be specific tax, legal, or investment advice.


About Rick

Richard W. Stout III is managing director of Benchmark Wealth Management, LLC, with 25 years of experience in the financial industry. He specializes in financial planning and asset management for individuals, families, and institutions seeking to build and monitor durable and sustainable plans for their financial futures. Rick is a Certified Financial Planner™ professional and holds the Accredited Investment Fiduciary® (AIF®) designation. He obtained his MBA from Rensselaer Polytechnic Institute and his BA in Economics and Anthropology from the University of Connecticut. Rick has earned a Master of Science degree in Personal Financial Planning from the College for Financial Planning. He has extensive background experience in lending, credit review and analysis, and real estate and partnership management. Learn more about Rick by connecting with him on LinkedIn.

About Thomas

Thomas J. Britt is managing director of Benchmark Wealth Management, LLC, with 23 years of experience in the financial industry. He specializes in executive financial planning, retirement planning, investing, as well as the management of trusts and endowments. Thomas is a CERTIFIED FINANCIAL PLANNER™ professional. He holds the Master Planner Advanced StudiesSM, MPAS®, Certified Investment Management Analyst® (CIMA®), and Chartered Retirement Planning Counselor℠, CRPC® designations. Thomas earned a Bachelor of Science in Finance from the University of New Haven, an MBA in financial technology from Rensselaer Polytechnic Institute, and a Master of Science in Personal Financial Planning from the College for Financial Planning. He is also a proud veteran of the United States Navy Submarine Force. Learn more about Tom by connecting with him on LinkedIn.

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