What does healthcare actually cost in retirement?
It's the line people underestimate most, and the one that arrives before Medicare does. Here's what to budget and where the surprises are.
What if my health changes? is one of the seven questions we hear most. Part of the answer is medical. Part of it is a number.
Healthcare is the retirement cost people underestimate most, and it's the one that arrives earliest. If you stop working before 65, you're paying for coverage yourself, at an age when it costs the most.
The short answer. Budget for three separate things. Coverage from the day you stop working until 65. Premiums, deductibles, and out of pocket costs after 65, which Medicare does not fully cover. And the possibility of long term care, which Medicare barely covers at all. Fidelity's 2026 estimate is that a single 65 year old needs $185,500 in after-tax savings for healthcare in retirement, and that figure deliberately excludes long term care and most dental. Roughly double it for a couple. Fidelity revises it every year.
The gap years are the expensive ones.
Retire at 60 and you have five years to cover before Medicare eligibility. This is the single most underestimated line in early retirement planning.
Your options are a marketplace plan, coverage through a spouse still working, or retiree coverage if your employer offers it, which fewer do each year. For a couple in their early sixties, a marketplace plan can run into five figures annually in premiums alone, before deductibles.
There's a planning wrinkle worth knowing. Marketplace subsidies are based on income, and in early retirement your income is partly a choice. Which means the same years that are ideal for Roth conversions may be years where extra income costs you a subsidy.
Those two goals pull against each other. Which one wins depends on your numbers, and it's exactly the kind of trade that needs looking at rather than assuming.
What Medicare does and doesn't cover.
At 65 Medicare begins, and the assumption that costs then stop is wrong.
Part A covers hospital stays. Part B covers outpatient care and carries a monthly premium. Part D covers prescriptions. Most people add either a Medigap policy or choose Medicare Advantage to handle what's left.
What Medicare does not cover, or covers only partially:
- Dental, vision, and hearing, which are significant costs later in life
- Most long term care, which is the largest single risk of all
- Deductibles, coinsurance, and out of pocket amounts across the parts
So "Medicare starts" means your costs change shape rather than disappear.
The part that catches high earners.
Medicare premiums are not the same for everyone. Above certain income levels you pay a surcharge, and it's based on your income from two years earlier.
For 2026, it begins above $109,000 of modified adjusted gross income for single filers and above $218,000 for joint filers, and the SSA publishes the current thresholds alongside what Medicare itself charges. That measure is broader than the taxable income shown on your return, and it counts things like municipal bond interest that are otherwise tax free. It steps up in jumps, so crossing a line by one dollar costs the same as crossing by thousands. And it applies per person, so a couple pays it twice.
This is why healthcare and tax planning aren't separate topics. A large Roth conversion or a property sale at 63 raises your Medicare premium at 65. We cover the mechanics in how to avoid the Medicare surcharge.
Long term care is a different category.
Extended care is not really a healthcare cost. It's a separate risk, large enough to reorder a plan, and Medicare covers very little of it.
CareScout's 2025 survey, which covers roughly 16,000 providers across every state, puts the national median for a private room in a nursing home at $129,575 a year. In-home care at $35 an hour reaches about $80,000 a year at 44 hours a week, and exceeds a facility once you need it around the clock. For a household with substantial assets, self funding is a legitimate answer. It just has to be a decision rather than an omission.
We work through it properly in how do you plan for long-term care, and the coverage side in is your insurance keeping up with your net worth.
How to build it into a plan.
Treat the gap years as their own line. From your retirement date to 65, priced at real quotes rather than an estimate. This is often what makes retiring at 60 rather than 63 an expensive choice.
Assume healthcare inflates faster than everything else. Applying general inflation to a medical line understates it.
Put it in the must-spend column. Health coverage isn't discretionary, which matters for how much flexibility your plan really has. See how much do you actually spend.
Look at the tax interaction before you retire, not after. Subsidy thresholds before 65, surcharge thresholds after. Both are income based, both have cliffs, and both are affected by decisions you make years earlier.
Consider an HSA if you still have access to one. Contributions, growth, and qualified withdrawals are all tax advantaged, which no other account offers. You can't contribute once enrolled in Medicare, so the window is while you're still working.
Nothing here sits on its own.
Healthcare is where your plan meets your taxes most directly. Your income decides your subsidy before 65 and your surcharge after. Your account mix decides how much control you have over that income. And a care event changes what the survivor's plan can afford.
Which is why we'd rather price this alongside everything else than treat it as a separate worry, and it's part of what how we work means.
Where to start.
- Get a real quote for coverage from your intended retirement date to 65, for both of you.
- Add a Medicare-era estimate, including a Medigap or Advantage premium and out of pocket costs.
- Check where your income sits against the subsidy thresholds before 65 and the surcharge thresholds after.
- Decide how several years of care would be funded, and write the answer down.
None of this requires predicting your health. It requires pricing the thing most plans leave as a placeholder.
No two households land on the same number here, because it depends on where you live, when you stop working, and what your income looks like in between. If you'd like yours priced properly, let's talk.
Cosmos Wealth doesn't provide tax, legal, or medical advice. Premiums, thresholds, subsidy rules, and cost estimates cited here are set by statute or published annually and change. Confirm current figures before planning around them.
Common questions.
- What does healthcare actually cost in retirement?
- Fidelity's 2026 estimate is $185,500 in after-tax savings for a single 65 year old, roughly double that for a couple, and that figure deliberately excludes long term care and most dental. Long term care sits on top of it: CareScout's 2025 national median for a private room in a nursing home is $129,575 a year.
- What are the gap years and why are they expensive?
- The years between stopping work and turning 65, when you are buying coverage in the individual market with no employer subsidy, at an age when it costs the most. For anyone retiring early it is frequently the largest single line in the plan, and it interacts with tax decisions, because the income you report affects what the coverage costs.
- What does Medicare not cover?
- Most dental, vision, and hearing, and critically not extended custodial care, which is the expense most likely to be large. Supplemental coverage closes some of the gap. It does not close that one.
- Why would a Roth conversion raise my Medicare premium?
- Because premiums are income-based and the income they look at is from two years earlier. A conversion at 63 shows up as a higher premium at 65. The increases arrive as cliffs rather than a gradual slope, so crossing a threshold by one dollar costs the same as crossing it by thousands.
- Should we self-fund long-term care or insure it?
- For a household with substantial assets, self funding is a legitimate answer. It just has to be a decision rather than an omission, and the calculation is not only whether you could write the checks. It is what happens to the surviving spouse, and who ends up managing the care.
