Estimating Total Healthcare Costs in Retirement

It is completely normal to feel a little uneasy when you start digging into healthcare costs in retirement. Many people spend decades assuming that Medicare will simply "take care of it" - and then, somewhere around age 60, they start reading the details and realize the picture is more layered than they expected.

Here is the honest starting point: Medicare Part B premiums in 2026 are $202.90 per month per person, according to the Centers for Medicare and Medicaid Services (CMS). That is a 9.7% increase from the 2025 standard premium of $185.00. For a couple, that is already $405.80 per month, before you have paid for a single prescription, a dental cleaning, or a pair of glasses.

But the premium is just the entrance fee. The real cost of healthcare in retirement is the sum of many parts, and understanding each one gives you the power to plan with clarity rather than anxiety. Let's walk through the full picture together.

Medicare Part B covers outpatient care, doctor visits, preventive services, and some medical equipment. Most people enroll at 65, and the standard monthly premium in 2026 is $202.90. But "standard" does not mean universal.

If your income in retirement is above certain thresholds, you will pay more through what is called the Income-Related Monthly Adjustment Amount (IRMAA). For 2026, individuals with modified adjusted gross income (MAGI) above $106,000 - or couples above $212,000 - pay higher premiums. The surcharges are based on your tax return from two years prior, which means your 2024 income determines your 2026 premiums. This is a detail that catches many retirees off guard, especially in years when they take large IRA withdrawals or complete Roth conversions. You can read more about how this works in our post on the IRMAA trap and Medicare premiums.

Beyond the premium, Part B also includes a $257 annual deductible in 2026 (per CMS), plus a 20% coinsurance on most services after you meet that deductible. That 20% with no cap is one reason most people do not rely on Original Medicare alone.

Medicare Part D covers prescription drugs, and it is separate from Part B. Premiums vary widely depending on the plan and your location, but the national base beneficiary premium for 2026 is set at $36.78 per month according to CMS - though the plans you can actually choose from in your area may cost more or less than that figure.

Part D also has IRMAA surcharges for higher earners, ranging from an additional $13.70 to $85.80 per month in 2026 depending on income level (CMS 2026 data).

One meaningful change in 2026 is the new $2,000 out-of-pocket cap on Part D costs, introduced under the Inflation Reduction Act. This is a significant improvement from prior years and provides more financial predictability for people who take multiple medications. Even so, if your medications are expensive, hitting that cap is a real possibility - and it is worth factoring into your annual healthcare budget.

Original Medicare (Parts A and B) leaves meaningful gaps - the 20% coinsurance, hospital deductibles, and no out-of-pocket maximum. Two broad approaches exist to address this:

• Medigap (Medicare Supplement Insurance): These are private plans that work alongside Original Medicare and help cover costs like coinsurance, copayments, and deductibles. Monthly premiums vary considerably by plan type, insurer, age, and location. Some widely discussed plans offer near-complete coverage of out-of-pocket costs, while others cover a smaller share. The trade-off is a higher monthly premium in exchange for more predictable spending.
• Medicare Advantage (Part C): These are all-in-one plans offered by private insurers that replace Original Medicare. Many have lower (or even $0) monthly premiums, but they typically involve provider networks, prior authorization requirements, and variable out-of-pocket costs. Some include dental and vision benefits, which Original Medicare does not.

Neither path is inherently better for everyone - the right fit depends on individual health needs, preferred doctors, travel habits, and budget. Presenting both to a licensed insurance broker or Medicare counselor through your State Health Insurance Assistance Program (SHIP) can help clarify the trade-offs for your specific situation.

For planning purposes, budgeting somewhere in the range of $100 to $300 or more per month per person for supplemental coverage is a reasonable placeholder, though actual costs vary significantly.

Here is where many retirement budgets have a quiet blind spot. Original Medicare provides very limited coverage for dental, vision, and hearing - three areas where healthcare needs often increase with age.

• Dental care: Routine cleanings, fillings, crowns, and dentures are not covered by Original Medicare. Dental insurance through a standalone plan or a Medicare Advantage plan can help, but coverage limits are common. Budgeting $1,000 to $2,000 or more per year per person for dental expenses is not unusual, and major procedures can cost significantly more.
• Vision care: Routine eye exams and eyeglasses are generally not covered by Original Medicare. Costs vary, but annual exams plus updated prescriptions can easily run several hundred dollars per year.
• Hearing aids: These are among the most significant uncovered expenses for older Americans. Hearing aids can cost $2,000 to $7,000 or more per pair and typically need replacement every several years.
• Long-term care: Medicare covers skilled nursing facility care only under specific, limited conditions, and it does not cover custodial care (help with daily activities like bathing or dressing). Long-term care costs can be substantial and represent a separate planning consideration entirely.

These "uncovered" costs have a way of accumulating quietly over a 20-year retirement. Including them in your healthcare retirement budget from the start gives you a much more realistic foundation to work from.

To illustrate how these costs stack up, consider a hypothetical couple, both age 65, retiring in 2026. This is a simplified, illustrative example only and is not intended to represent any specific individual's situation.

Estimated annual healthcare costs per person (2026 dollars):

• Part B premium: $2,434.80 ($202.90 x 12)
• Part D premium: approximately $441.36 ($36.78 x 12, using base figure)
• Medigap or supplemental coverage: $1,800 to $3,600 (estimated range)
• Dental and vision: $1,000 to $2,000
• Remaining out-of-pocket costs (copays, non-covered services): $500 to $1,500

Adding those figures together, a rough estimate for one person might fall in the range of $6,200 to $10,000 per year in today's dollars - before accounting for healthcare inflation, which has historically run higher than general inflation.

For a couple over a 20-year retirement, even a conservative estimate using $7,000 per person per year (in today's dollars) produces a total of around $280,000. Adjust for healthcare inflation at even 3% to 4% per year, and the nominal total climbs considerably higher. The Employee Benefit Research Institute (EBRI) has published research on retiree healthcare cost projections that can be a useful reference for understanding the range of scenarios.

The goal here is not to alarm you. It is to help you see healthcare as a line item that deserves its own budget, rather than a vague worry sitting in the background. Knowing the number - even a rough one - is more empowering than not knowing it. You might also find it helpful to look at how inflation affects your overall retirement spending, as we explored in our post on what $100,000 really becomes after inflation.

Building a healthcare budget for retirement does not require a spreadsheet with 40 tabs. A few practical approaches are worth considering:

• Use a Health Savings Account (HSA) while you still can. If you currently have a high-deductible health plan (HDHP) through an employer, an HSA offers a triple tax advantage: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. In 2026, the IRS contribution limits are $4,300 for individuals and $8,550 for families, with a $1,000 catch-up for those 55 and older. Once you enroll in Medicare, you can no longer contribute to an HSA - but you can still spend the accumulated balance on qualified medical expenses.
• Factor in healthcare inflation separately. General retirement planning often uses a blended inflation figure, but healthcare costs have historically risen faster. Running a separate healthcare cost projection - even a rough one - helps you avoid underestimating this category.
• Review your Medicare options annually. The Medicare Annual Enrollment Period runs from October 15 to December 7 each year. Plan formularies, premiums, and networks can change, and what worked well in year one may not be the most cost-effective option in year five.
• Consider your income sources carefully. Because Medicare premiums are income-sensitive, the timing and structure of withdrawals from retirement accounts can affect what you pay. This is one area where working with a qualified financial adviser can make a meaningful difference - especially if you are considering Roth conversions or large one-time withdrawals.

Understanding how your overall retirement budget comes together - including housing, travel, and healthcare as distinct categories - tends to produce a more accurate and less stressful planning experience than treating retirement spending as a single lump sum.

This article is intended for general educational purposes only and does not constitute personalised financial, tax, or insurance advice. Healthcare costs and Medicare rules are subject to change. Every individual's situation is different, and the figures used here are illustrative only. We encourage you to consult a qualified financial adviser, a licensed insurance professional, or a free Medicare counselor through your State Health Insurance Assistance Program (SHIP) before making decisions about Medicare coverage or retirement healthcare planning.