Healthcare is often one of the most underestimated expenses in retirement. While many individuals spend decades building retirement savings, the potential impact of medical expenses is sometimes overlooked, even though healthcare costs can significantly affect long-term financial security.
According to Fidelity’s 2025 Retiree Health Care Cost Estimate, a 65-year-old retiring today could spend approximately $172,500 on healthcare expenses throughout retirement. This estimate does not include long-term care, which may represent an additional and potentially substantial expense. https://newsroom.fidelity.com/pressreleases/fidelity-investments--releases-2025-retiree-health-care-cost-estimate--a-timely-reminder-for-all-gen/s/3c62e988-12e2-4dc8-afb4-f44b06c6d52e
For individuals approaching retirement, healthcare planning is less about predicting the exact cost and more about understanding potential expenses and evaluating available strategies. This guide to retirement healthcare planning explores:
The potential cost of healthcare in retirement
Why long-term care planning matters
How medical history may affect insurance coverage
Strategies that may help manage retirement medical expenses
Understanding these topics may help individuals approach retirement healthcare decisions with greater clarity.
TL;DR
Healthcare costs in retirement may reach $172,500 or more per person, according to 2025 estimates.
Long-term care is a separate expense that may require additional planning.
Medical history can affect insurance eligibility and premium costs.
Health Savings Accounts (HSAs), Medicare supplemental coverage, and hybrid insurance policies may help individuals manage healthcare expenses.
Working with a financial professional may help incorporate healthcare costs into a broader retirement strategy.
The Real Cost of Healthcare in Retirement
Healthcare costs can represent a significant portion of retirement spending, particularly as individuals age. The Milliman 2025 Retiree Health Cost Index (https://www.milliman.com/en/insight/retiree-health-cost-index-2025) estimates that a healthy 65-year-old enrolled in traditional Medicare may spend approximately:
$275,000 in lifetime healthcare costs for men
$313,000 for women
These projections generally include:
Medicare premiums
Deductibles
Coinsurance
Out-of-pocket medical expenses
However, these estimates typically exclude long-term care costs, which can increase total healthcare spending depending on individual circumstances. Another factor to consider is healthcare inflation, which historically has risen faster than general inflation. Over a retirement that could last 20 to 30 years or longer, rising healthcare costs may affect retirement budgets.
Planning for Long-Term Care Costs
Long-term care refers to assistance with everyday activities such as bathing, dressing, mobility, and personal care. This type of care may be provided in several settings, including:
Assisted living facilities
Nursing homes
At-home care environments
Research suggests that approximately 70% of people over age 65 may require some form of long-term care during their lifetime, Long-Term Care Insurance: 10 Things You Should Know | Kiplinger although the level and duration of care can vary widely. Several approaches are commonly used to address long-term care costs.
1) Traditional Long-Term Care Insurance
These policies are designed to help cover the cost of long-term care services. Premiums vary depending on age, health status, and coverage features.
2) Hybrid Insurance Policies
Some life insurance or annuity products offer riders that allow policyholders to access benefits if long-term care services are needed.
3) Self-Funding
Some retirees plan to cover long-term care expenses using personal savings or investments. The suitability of this approach depends on individual financial resources and circumstances.
4) Medicaid
Medicaid may help cover long-term care costs for individuals who meet specific income and asset eligibility requirements.
How Medical History Can Affect Healthcare Coverage
Medical history can influence healthcare coverage options and costs, particularly when evaluating Medicare Supplement (Medigap) policies. Outside of guaranteed issue periods, insurers may use medical underwriting when evaluating applications for Medigap coverage. Most individuals have a six-month Medigap guaranteed issue window that begins when they enroll in Medicare Part B at age 65. During this window, insurers generally must offer coverage regardless of health status. Another important consideration is choosing between Original Medicare and Medicare Advantage plans. Because healthcare needs and prescription medications can change over time, reviewing coverage options annually during Medicare Open Enrollment (October 15 – December 7) may be helpful.
Practical Strategies for Healthcare Cost Management
There is no single strategy that works for every individual when planning for healthcare costs in retirement. However, several tools may help address potential expenses.
Health Savings Accounts (HSAs)
HSAs offer several tax advantages for individuals enrolled in high-deductible health plans:
Contributions may be tax-deductible
Investment growth may be tax-deferred
Withdrawals for qualified medical expenses are generally tax-free
HSA funds can remain invested and used for healthcare expenses in retirement.
Medicare Supplement Coverage
Medigap policies may help cover certain out-of-pocket costs associated with Original Medicare.
Preventive Care
Preventive care—including screenings and regular checkups—may play a role in supporting long-term health outcomes.
Reviewing Prescription Drug Plans
Prescription drug coverage under Medicare Part D can vary significantly between plans. Reviewing available plans annually may help ensure current medications remain covered.
Working With a Financial Advisor
Healthcare planning is often one component of a broader retirement strategy. A financial professional may help individuals evaluate healthcare cost assumptions, insurance options, and how these expenses fit within a long-term retirement plan.
Conclusion
Healthcare planning is an important component of retirement preparation. Healthcare costs can represent a meaningful portion of retirement spending, and long-term care expenses may add additional complexity. Several key themes emerge when considering retirement healthcare planning:
Healthcare expenses may represent a significant retirement cost
Long-term care planning deserves dedicated consideration
Insurance coverage choices and medical history may affect available options
Tools such as HSAs, Medicare coverage, and long-term care strategies may help individuals address potential healthcare expenses
Individuals who would like guidance in evaluating these considerations may benefit from discussing their situation with a financial professional.
Disclosure
This article is provided for informational purposes only and should not be considered investment, tax, or legal advice. Healthcare costs and insurance options vary based on individual circumstances. Individuals should consult with qualified financial, tax, or legal professionals before making decisions related to retirement planning or healthcare coverage.