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 hiring a home health care aide. But it’s best to hope for the best case and be prepared for the worst.
Retirement, after all, can be expensive, and healthcare costs will likely be a significant part of what you spend your money on. According to the 2025 Fidelity Retiree Health Care Cost Estimate, for instance, the average retired 65-year-old can expect to spend around $172,500 in after-tax savings on health care expenses.
“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. So, how can you know what to expect and how to budget? Below, we outline the highest costs to expect in 2026 and four financial strategies to ensure you’re prepared.
[READ: Does Medicare Pay for Nursing Homes?]
What Are the Largest Medical Expenses in Retirement?
Long-term care tends to be the largest medical expense in retirement, but if you remain healthy, it’s probably going to be your monthly Medicare premiums and out-of-pocket costs for healthcare services such as dental and vision.
Healthcare needs vary from person to person and change over time, however. What is certain is that when you retire, if you can afford to, you’ll need to put aside money for your healthcare. If you’re wondering what the highest medical costs are that you’ll likely encounter, here’s what you should be budgeting for.
— Medicare premiums
— Senior living and nursing home costs
— Home healthcare costs and caregiver services
Medicare premiums and out-of-pocket costs
For most people, eligibility for Medicare starts at age 65. While coverage may offset hefty medical expenses, you’ll still need to budget for premiums, deductibles and expenses that are not covered by your plan.
Senior living and nursing home costs
Moving to a senior living community can significantly impact your budget. Typically, the more care you need, the higher your costs will be, and prices generally increase every year.
Home healthcare costs and caregiver services
As you age, your healthcare 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 healthcare, such as injections, therapy or wound care, in the comfort and convenience of your own home.
According to CareScout’s Cost of Care Survey, the average cost of a nonmedical caregiver is $35 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 $350 a week. Those costs add up.
[READ: How Much Does In-Home Care Cost & How to Pay for It]
Care Type Cost Comparison
Here are the types of caregiver costs and healthcare expenses that you could need to save for, how much you’ll need to put away and how most people pay for it.
| Type of Care | Average Monthly Cost (2026) | Primary Funding Source |
| Medicare (Premiums/Copays) | Varies by many factors. Part A is usually free of premiums. Part B is not, but it may be free or reduced, depending what plan you have. | It varies. It may be deducted from your government benefits, such as Social Security, or you may use your health savings account to pay them. |
| Home Health Aide | Approximately $6,000 (44 hours a week) | Private pay or possibly long-term care (LTC) insurance |
| Assisted Living | Approximately $6,200 a month | Private pay or LTC insurance |
| Nursing Home (Private Room) | Approximately $10,798 a month | Private pay or LTC insurance |
But, of course, there are other healthcare costs to plan for during your retirement.
[READ: Long-Term Care Facilities: Types and Costs]
Rising prescription drug prices and Part D changes
Prescription drugs can come with high sticker prices. 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 that include prescription drug coverage.
The Part D Premium Stabilization Demonstration was extended for 2026, but the monthly premium subsidy was lowered to $10 from $15, and the premium increase cap was increased to $50 (from $35 in 2025). Because of overall price increases, some carriers have exited the market altogether rather than try to compete. In fact, the number of stand-alone Part D plans fell from 464 in 2025 to 360 in 2026, according to KFF.
Dental, vision and hearing: Medicare coverage gaps
Dental, vision and hearing costs tend to fall outside the scope of basic Medicare plans. So, you’ll likely need to pay more out of pocket or enroll in a Medicare Advantage plan, which often includes some coverage as part of its supplement benefits.
Dental“Virtually every month, I have at least one client complain about coverage for dental expenses, crowns especially, not being sufficient,” says Rick Miller, a financial planner and investment advisor at Miller Investment Management, headquartered in Manassas, Virginia.
Bruce Maginn, a financial advisor at Solomon Financial in Carmel, Indiana, 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 adds.
Miller suggests comparison shopping to find a Medicare Advantage plan with excellent dental benefits if you need a fair amount of work done. These benefits 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.
Vision
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.
Miller 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.
Hearing
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, but how much can vary. Nobody should assume that any Medicare Advantage plan you get will automatically cover, say, $10,000 worth of hearing aids.
[SEE: Best OTC Hearing Aids]
How to Pay for Healthcare If You Retire Before Age 65
You will need to purchase some form of health insurance. 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. But health insurance in retirement becomes much less complicated and less expensive, thanks to Medicare.
COBRA coverage: Costs and duration
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, according to some estimates, and there is sometimes up to a 2% administration fee added to your bill.
Short-term health insurance as a bridge to Medicare
Short-term health 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.
4 Financial Strategies to Protect Your Retirement Savings
— Maximize health savings accounts
— Set up an irrevocable trust
— Consider long-term care insurance or hybrid insurance
— Diversify your investments for inflation
As we all know, 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 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 healthcare costs without too much angst.
As for the strategies we just mentioned, let’s take a look at how you may want to approach them and protect your retirement savings.
1. Maximize health savings accounts
Health savings accounts, or HSAs, can be particularly helpful, Maginn says. For instance, if you opened and contributed to an HSA during your working years, you may be able to use those funds in retirement to cover home health care expenses and Medicare costs, such as premiums and copays. However, once you’ve enrolled in Medicare, you can no longer contribute toward an HSA. In other words, an HSA in retirement is helpful, but generally if you started an HSA long before you were retired.
2. Set up an irrevocable trust
This option, designed by an estate planning attorney, is an often overlooked tool — but you need to set it up 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.
3. Consider long-term care or hybrid insurance
A long-term care insurance policy can help cover senior living costs, but purchasing one can backfire, according to Greenfield. If you outlive the total benefit, for instance, you may need to pay out of pocket or rely on Medicaid. Conversely, she says there’s a 30% to 50% chance you won’t need the benefit at all and will lose the value of the accumulated insurance premiums, so it may make sense to purchase hybrid insurance, which can be used for other purposes as well.
4. Diversified investment vehicles for health care inflation
Investing in your HSA, annuities or other flexible long-term savings vehicles, such as appreciating securities, can create a nest egg you can use for future medical expenses.
[READ: Senior Living Tax Breaks: How to Deduct Assisted Living, Memory Care and Other Senior Care Expenses]
Tax Strategies for Retirement Health Costs
As you’re planning for retirement health costs, don’t forget to think about taxes. You’ll want to do what you can to keep your tax burden low, which will keep your health costs lower.
That means, in part, keeping good records of your medical expenses. Hiring a tax professional may be helpful.
How to deduct senior living expensesThe Internal Revenue Service lets taxpayers deduct unreimbursed qualified medical expenses — but only the money that exceeds 7.5% of your adjusted gross income (AGI).
So if your medical expenses end up being 20% of your adjusted gross income, the first 7.5%, you’ll pay for. The rest can be deducted.
So let’s say that last year your AGI was $50,000 — 7.5% of that is $3,750. You’ll get no tax break for that. Medical expenses beyond $3,750, you can deduct.
That may sound fairly straight-forward, but senior living expenses are many, and not everything can be deducted. There’s deductible medical care and non-deductible custodial care.
Medical care are items like that hospital bill for your knee replacement surgery. An example of a non-deductible custodial care expense would be if you paid a home health aide to drive you to the hospital or do your cooking once you got back from the hospital.
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 (2026 Guide) originally appeared on usnews.com
Update 04/23/26: This story was previously published at an earlier date and has been updated with new information.
