Most people know what they want their retirement to look like, and it likely involves going on a cruise rather than, say, purchasing a walker or paying for a home health care aide. But it’s best to hope for the best case and be prepared for the worst.
Ideally, you’ll budget for fun, but also the not-so-fun stuff.
Retirement, after all, can be expensive, especially if you want to travel or enjoy life without worrying about money too much, and health care costs will likely be a significant part of what you spend your money on.
According to the 2022 Fidelity Retiree Health Care Cost Estimate, the average retired couple at age 65 can expect to spend around $315,000 on health care expenses in retirement.
“Roughly 70% of US adults who live to age 65 will need some form of paid care before they die,” says Jennifer Greenfield, a social work professor at the Graduate School of Social Work at the University of Denver and a faculty member of the Knoebel Institute for Healthy Aging. She adds that not everyone who needs paid care will get it.
[HSA and Medicare: Using HSA To Pay for Medicare Premiums]
Changes for Health Care Costs
Complicating matters even further, Greenfield says, are changes in the government, such as the proposed changes in the budget bill before Congress.
“If the bill passes, 1.4 million older adults will face increased costs through loss of Medicaid contributions to Medicare premiums, while many more may lose Medicaid coverage altogether as a result of federal funding cuts,” Greenfield says, adding that, “in total, nearly $500 million in Medicare cuts and $700 billion in Medicaid cuts will mean that older adults face much higher costs for health insurance if the bill passes.”
We haven’t even mentioned inflation. As expensive as health care is now, it’s just going to become more so.
Of course, health care needs vary from person to person and change over time, and if you’re reading this before retiring, your retirement date may be far enough away that you’re not too concerned about the economic climate now. But if you’re wondering what the highest medical costs are that you’ll likely encounter, here’s what you should be budgeting for.
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Top Health and Medical Expenses in Retirement
— Health care insurance premiums
— Home health care costs
— Senior living costs
— Nursing home costs
— Dental expenses
— Hearing costs
— Vision costs
— Prescription drug costs
Health Care Insurance Premiums
For most people, eligibility for Medicare starts at age 65. If you retire before then, your most significant expense will likely be health insurance premiums for private coverage.
If your employer provided health insurance coverage during your working years, you might be able to keep your coverage through the company’s plan. The Consolidated Omnibus Budget Reconciliation Act, or COBRA for short, is a law that allows workers and their families to continue their health benefits through a former employer’s group health insurance plan for a limited time after their employment ends. Typically, COBRA continuation coverage lasts 18 to 36 months after leaving the workplace. However, COBRA coverage is often expensive, and companies with 20 or fewer employees may not need to follow COBRA guidelines.
The average monthly premium for COBRA ranges from $400 to $700 per individual (that may work out for a single person covering themselves, but it really adds up if you have a spouse and children), and there is sometimes up to a 2% administration fee added to your bill.
Short-term insurance is another health coverage option. This is a bridge, or temporary, plan that has a maximum policy period of 364 days. At the end of that time, you may apply for a new term of insurance. You can use this until you are eligible for Medicare, or you get a job that includes health insurance benefits.
Once you qualify for Medicare, it isn’t like your health care costs go away. You will still need to pay for premiums, deductibles and expenses that are not covered by your plan.
[READ: How Medicare Might Change for 2026 and How It Will Affect Your Coverage]
Home Health Care Costs
As you age, your health care needs — and associated costs — may change.
For example, if you have a health situation that requires a higher level of monitoring, such as stroke rehabilitation or a recent joint replacement, you might need home health care, such as injections, therapy or wound care, in the comfort and convenience of your own home.
According to Genworth Financial’s 2024 Cost of Care Survey, the average cost of a home health care aide is $34 an hour. That may not sound too bad, but if you need a home health care aide to check in, say, 10 hours a week, that’s $340 a week. Those costs add up.
[READ: Assisted Living vs. Home Care: What’s the Difference?]
Senior Living Costs
If you decide to move into an independent living community or assisted living facility, the related expenses will typically be paid out of your own savings, including your retirement and investment accounts.
According to Genworth Financial’s Cost of Care Survey, the national median cost of an assisted living community in 2024 — the most recent data available — was $5,900 per month, or $70,800 annually.
“Most long-term care is not covered by Medicare, so this type of help often becomes the largest medical expense faced by older adults,” Greenfield says, and she adds that assisted living is one of those expenses that Medicare doesn’t cover.
It might also be helpful to know that if you have a Medicare Advantage plan, it may cover some non-medical services that are similar to services that assisted living facilities offer, like meal delivery and transportation to and from the doctor. But, still, actually living in an assisted living facility is a pricey proposition. Of course, there is Medicaid for financially eligible seniors to lean on, but though it covers a lot of services that you’ll receive at an assisted living center, it does not provide for room and board (though many states offer waivers to help with those costs).
Before you make a commitment to an assisted living facility, find out what specific services and care it provides, as this can vary widely from state to state and facility to facility. While these communities have evolved to include more medical services over the years, most still provide limited clinical care, physician presence and registered nurses on-site.
[Read: How to Pay for Assisted Living]
Nursing Home Costs
A nursing home tends to provide higher levels of care than assisted living, which boosts the price.
For instance, a private room in a nursing home costs an average of $10,646 per month, according to Genworth Financial. Semiprivate rooms, which go for an average of $9,277 per month, are slightly more affordable. You might pay for these stays with your own funds or through long-term care insurance.
There are many different long-term care plans to cover expenses. For instance, some life insurance and annuity policies have riders where you can apply the death benefit toward long-term care expenses.
But while long-term insurance sounds like a panacea, it doesn’t work for everyone, says Bruce Maginn, a financial advisor at Solomon Financial in Carmel, Indiana.
“The premium cost for a long-term care insurance or partnership plan is affected by the health, age and amount of benefit desired for long-term care insurance,” Maginn says. “Each of these factors may drive the cost of insurance to a prohibitive amount.”
According to the 2024 American Association for Long-Term Care Insurance’s annual Price Index survey, the average annual premium for a $165,000-benefit policy with no inflation protection is $950 for a single male (age 55). It’s $1,500 for a single female (age 55). That may not sound too bad, but that is an average, so it could be higher (or less), and if you are older when you get a long-term care insurance, it will be more expensive, of course. And there’s no guarantee you can even get long-term care insurance.
“Poor health may rule out any chance for long-term coverage,” Maginn says.
“Thankfully, about 90% of those who need nursing home care need it for three years or less, meaning that the risk of multi-year stays is relatively low,” Greenfield says. “However, it’s important to think about the possibility of needing three years of care.”
And, of course, if you’re in the 10% who need nursing care longer than three years, that’s more money you will have set aside.
Dental Expenses
Regular dental care falls outside the scope of basic Medicare plans.
Rick Miller is a financial planner and investment advisor at Miller Investment Management, headquartered in Manassas, Virginia. “Virtually every month, I have at least one client complain about coverage for dental expenses, crowns especially, not being sufficient.”
Maginn has heard similar complaints from some clients. “Dental costs are infrequently covered by Medicare, unless they are related to a medical condition or an accident,” he says.
Maginn notes that routine dental care isn’t usually too tough for retirees, but it’s another story if you need “full mouth reconstruction, and full mouth implants. These procedures may cost tens of thousands of dollars. Even cosmetic dental services, such as composite or porcelain veneers will cost between $250 to $2,500 per tooth.”
Medicare Advantage plans, which are offered through Medicare-approved private insurance companies, may include coverage for dental procedures. Miller suggests that if you think you will need a fair amount of dental work done, you should take your time comparison shopping to find a Medicare Advantage plan that offers excellent dental benefits. Though these may be harder to find in the future, as dental care is expected to be one of the first benefits that Medicare Advantage carriers cut to save money and compensate for other escalating costs.
Hearing Costs
Miller says that he often hears clients complaining about “astronomical hearing aid costs,” and that it’s not usual for some people to have to pay $10,000 for hearing aids.
Fortunately, many Medicare Advantage plans do cover hearing aids. Still, how much of a hearing aid is covered can vary. Nobody should assume that any Medicare Advantage plan you get will automatically cover, say, $10,000 worth of hearing aids.
Vision Costs
Medicare doesn’t cover routine eye exams, eyewear or contact lenses. However, it will cover expenses related to some eye diseases and procedures. For example, Medicare Part B covers an annual eye exam for diabetic retinopathy and will cover the diagnosis and treatment of cataracts when deemed medically necessary.
Some Medicare Advantage plans may help with routine vision care. Miller says that he hears the fewest complaints from his clients on vision care, “probably because there are so many low-cost alternatives out there,” he says, citing Costco, Sam’s Club and BJ’s Wholesale Club. Of course, you have to be willing to pay the membership fee at these warehouse retailers to get cheaper exams, glasses and contact lenses.
Prescription Drug Costs
Prescription drugs can come with high sticker prices, Botta says. However, you have some options that can help you save on these costs, including certain discount and coupon tools, such as GoodRx and SingleCare. Discount cards for prescriptions — America’s Pharmacy, Choice Drug Card, GoodRx Gold (which has a monthly membership fee starting at $9.99 a month) and ValpakRx — might provide additional ways to save.
It’s also best to think ahead when selecting a prescription drug insurance plan, such as Medicare Part D or Medicare Advantage plans.
Unfortunately, if the Part D Premium Demonstration isn’t extended once it expires at the end of 2025, premiums for prescription drug plans could skyrocket for Medicare beneficiaries. If this happens, several carriers are expected to exit the market altogether rather than try to compete, which will only further limit enrollees’ choices and allow for price gouging.
Some Strategies to Prepare for Medical Costs
The bad news is that saving for the highest medical costs during retirement isn’t easy. Nobody’s figured out a sure-fire plan for doing it. But financial advisors have been working on coming up with strategies for years, and, with enough time and resources, especially if you work with a professional such as a financial advisor, you may be able to come through your retirement and health care costs without too much angst.
A few of the strategies you might consider using to finance your health care needs in retirement include:
— An irrevocable trust
— A health savings account
— Long-term care insurance
— Hybrid insurance
— Investments
For instance, Maginn says, “One often overlooked tool for long-term care costs involves creating an irrevocable trust designed by an estate planning attorney.”
But you need to set up one long before you actually need it.
“Once assets have been held inside of a trust for five or more years, they are considered to be owned by the trust and thereby can make a senior eligible for Medicaid assistance, should they need long-term care,” Maginn says.
Health savings accounts (HSAs) can also be really useful tools, Maginn says. For instance, if you opened and contributed to a health savings account during your working years, you may be able to use those funds in retirement to cover home health care expenses and Medicare Part A (inpatient care), Part B (outpatient care) and Part D (prescription drug) premiums.
In 2025, you can save up to $4,300 for an individual or $8,500 for a family tax-free in your HSA each year. If you’re over 55, you can contribute another $1,000 annually.
But this is where planning ahead can really help out. An HSA only really helps you with your medical costs during retirement if you set one up long before you retire. Once you’ve enrolled in Medicare, you can no longer contribute toward an HSA. However, you can still use the money that’s in there for medical expenses, such as drug and office visit co-pays, deductibles and even contracting for services related to housekeeping, cleaning, running errands and other activities of daily living.
And while the aforementioned long-term care insurance is one of those strategies some people use, and getting a policy certainly falls into the important category of thinking ahead, purchasing a policy can backfire, according to Greenfield.
“If the covered person needs benefits, they may outlive the total benefit amount–meaning they will end up paying out of pocket or relying on Medicaid after benefits run out,” she says. “There’s also a 30% to 50% chance the purchaser won’t need the benefit at all, and will thus lose value of the accumulated insurance premiums.”
Because of that, Greenfield says that some financial experts argue that it may make more sense to purchase either hybrid insurance that can be used for other purposes as well, or to set money aside by investing in health savings accounts, annuities or other flexible long-term savings vehicles such as appreciating securities.
Bottom Line
Planning ahead is the best way to prepare for the sometimes high costs associated with aging. If somehow you end up saving too much, that’s not the worst thing in the world. Maybe you’ll have more money to pass down to heirs, or maybe you’ll be able to afford one heck of a blowout for your 100th birthday.
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The Highest Medical Costs to Expect in Retirement originally appeared on usnews.com
Update 06/25/25: This story was previously published at an earlier date and has been updated with new information.
