What Are Healthcare Costs in Retirement? What to Expect and How to Plan
This article is part of our Retirement Planning resource center, where we cover income planning, taxes, healthcare, and investment strategy as retirement approaches.
By Nino Lekarczyk | WealthRidge Investments
Published: July 4th, 2026
Key Takeaways
- Healthcare is one of the largest and most unpredictable expenses in retirement
- Medicare does not cover all costs, leaving retirees responsible for premiums, deductibles, and additional services
- Healthcare expenses typically increase with age, especially later in retirement
- Long-term care is a major potential cost not covered by traditional Medicare
- Planning for healthcare is essential to ensure retirement savings last
Healthcare is often one of the largest and most unpredictable expenses in retirement
Healthcare costs in retirement include Medicare premiums, out-of-pocket medical expenses, prescription drugs, and potential long-term care needs.
Many people focus heavily on saving for retirement but underestimate how much medical costs may increase over time. Even with Medicare coverage, retirees may still face expenses related to premiums, deductibles, prescription drugs, and long-term care.
Because healthcare costs can evolve throughout retirement, planning for these expenses is an important part of building a sustainable financial strategy.
Understanding how Medicare works, how medical expenses may change over time, and how those costs interact with retirement income can help retirees prepare more effectively.
How Healthcare Costs Change in Retirement
Healthcare spending typically increases with age.
In early retirement, costs may be manageable. However, expenses often rise later in life as healthcare needs become more complex.
Common healthcare expenses include:
- Medicare premiums and supplemental coverage
- Prescription drug costs
- Out-of-pocket medical expenses
- Dental, vision, and hearing services
- Long-term care needs
Because of this uncertainty, retirement planning should account for how healthcare costs may evolve over time—especially when evaluating how long your savings may need to support both living expenses and medical needs.
Understanding Medicare
Medicare becomes available for most individuals at age 65 and typically forms the foundation of healthcare coverage in retirement.
However, Medicare does not cover every healthcare expense. Many retirees still pay for premiums, deductibles, and services not fully covered by Medicare.
Medicare coverage generally includes several parts:
Part A – Hospital Insurance
Covers hospital stays and certain inpatient services.
Part B – Medical Insurance
Covers doctor visits, outpatient care, and preventive services.
Part D – Prescription Drug Coverage
Helps cover the cost of prescription medications.
Many retirees also choose supplemental insurance plans to help cover expenses that traditional Medicare does not fully pay.
Because these choices can affect both healthcare costs and overall retirement planning, they are often evaluated as part of a broader financial strategy.
Income and Medicare Premiums (IRMAA)
Many retirees are surprised to learn that Medicare premiums can increase based on income.
Higher-income individuals may pay additional surcharges on their Medicare Part B and Part D premiums. These adjustments are known as Income-Related Monthly Adjustment Amounts (IRMAA).
Because retirement income from sources such as investment withdrawals, Required Minimum Distributions (RMDs), or capital gains may affect these thresholds, tax planning can play a role in managing healthcare costs.
Healthcare Before Medicare
Some individuals retire before age 65 and must arrange healthcare coverage before Medicare begins.
Early retirees may rely on several options, including:
- Employer retiree healthcare benefits
- COBRA continuation coverage
- Private health insurance plans
- Marketplace insurance options
Because healthcare coverage during these years can be expensive, retirement timingdecisions often take these costs into consideration.
Long-Term Care Considerations
Long-term care is one of the most significant healthcare risks retirees may face.
Long-term care may include assistance with daily activities such as bathing, dressing, or managing medical conditions. These services may be provided in a nursing facility, assisted living facility, or through in-home care.
Traditional Medicare generally does not cover most long-term care services, which means individuals often need to rely on personal savings, insurance solutions, or other financial resources.
Planning for potential long-term care needs is an important part of retirement planning, particularly for individuals with longer life expectancies.
Healthcare Costs and Retirement Income Planning
Healthcare expenses are closely connected to retirement income planning.
Because medical costs can increase over time, retirement portfolios often need to support both everyday living expenses and potential healthcare needs.
Some retirement strategies include:
- Maintaining a dedicated healthcare reserve
- Structuring portfolios to balance stability and long-term growth
- Evaluating insurance solutions that may help manage certain risks
Understanding how healthcare expenses fit into an overall retirement income strategy can help ensure these costs do not unexpectedly disrupt long-term financial plans.
How Financial Planners Evaluate Healthcare Costs
Financial planners incorporate healthcare assumptions into retirement projections.
This may include estimating Medicare premiums, evaluating long-term care scenarios, and modeling how healthcare costs may change over time.
These projections are often integrated into broader retirement planning analysis to evaluate how healthcare expenses interact with income, taxes, and investment strategy.
Planning for Healthcare in Retirement
Healthcare costs can be one of the most unpredictable and impactful variables in retirement planning.
A comprehensive plan considers how medical expenses, Medicare decisions, income strategy, and long-term care risks work together over time.
At WealthRidge Investments, we work with individuals and families to evaluate how healthcare costs fit into their broader retirement strategy—so these decisions are made in context, not in isolation.
If you would like a clearer understanding of how healthcare expenses may affect your retirement plan, a structured review can help provide clarity.
WealthRidge works with clients throughout Illinois—including Burr Ridge, Oak Brook, Hinsdale, and surrounding communities—as well as with clients nationwide through virtual planning.
About the Author
Nino Lekarczyk
Founder & Financial Advisor
WealthRidge Investments
With nearly a decade of experience guiding thousands of clients, Nino brings the perspective of large-firm investing combined with the personalized focus of an independent advisor.
- Fidelity Investments — advised on $1B+ in client assets
- JPMorgan — built a $100M advisory practice
- Experience guiding thousands of client relationships
Today, he applies that experience through a client-first approach focused on retirement planning, tax-aware investment strategy, and long-term financial clarity.
Frequently Asked Questions
Does Medicare cover all healthcare costs?
No. Medicare provides important coverage, but it does not cover everything. Retirees are still responsible for premiums, deductibles, and services such as dental, vision, hearing, and most long-term care expenses.
What is IRMAA and how does it affect Medicare premiums?
IRMAA (Income-Related Monthly Adjustment Amount) is a surcharge applied to Medicare Part B and Part D premiums for higher-income individuals. Retirement income from sources like investment withdrawals or Required Minimum Distributions can affect whether these higher premiums apply.
What happens if I retire before age 65?
If you retire before Medicare eligibility, you will need to secure private health insurance. Options may include employer-sponsored retiree plans, COBRA, or marketplace coverage. These costs can be significant and are often considered when evaluating retirement timing.
Are long-term care expenses covered by Medicare?
No. Traditional Medicare does not cover most long-term care services. This type of care is often paid for through personal savings, insurance solutions, or other financial resources, making it an important consideration in retirement planning.
How do healthcare costs affect retirement income planning?
Healthcare expenses can reduce available income and increase withdrawal needs over time. Because of this, retirement plans often incorporate healthcare assumptions when evaluating how long savings may last and how income should be structured.
Get Clarity on Your Retirement Plan
No cost, no obligation—just a chance to see if we’re a good fit.