Average Cost of Healthcare in Retirement: How to Build a Realistic Estimate

The average cost of healthcare in retirement can be a useful starting point, but it is not a personal forecast. Your total depends on when you retire, what coverage you choose, how long you live, your health needs, and whether you include long-term care. A realistic estimate separates these moving parts, uses assumptions you can explain, and leaves room to update the plan as circumstances change.

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What Does the Average Cost of Healthcare in Retirement Include?

There is no single definition behind every estimate of healthcare spending in retirement. Some figures focus on premiums and typical medical expenses for a person with a particular age and coverage assumption. Others estimate costs across an entire retirement, sometimes including only selected out-of-pocket items. A number is useful only when you understand the expenses and assumptions behind it.

For example, Fidelity’s 2025 estimate, as reported by the Society for Human Resource Management, says a 65-year-old retiring in 2025 can expect to spend an average of $172,500 on healthcare and medical expenses throughout retirement. A 2024 presentation from the Pension Research Council at the Wharton School describes a different estimate: an average household at age 65 spending $272,000 on medical care, of which $59,000 is out of pocket. These figures are not interchangeable. They come from different analyses, and the short summaries do not establish identical coverage, household, or expense assumptions. Read them as illustrations of the scale and uncertainty of the question, not as a prediction for you.

Before using any average, check whether it refers to one person or a household, whether it is a lifetime total or an annual amount, and what year’s dollars it uses. Also check whether it includes premiums, prescription drugs, dental and vision care, or long-term services. A comparison without those details can make two sound estimates seem more contradictory than they are.

For more background, see the SHRM coverage of Fidelity’s retiree healthcare estimate and the Pension Research Council presentation on healthcare costs in retirement.

Which Healthcare Expenses Should You Put in the Estimate?

Build your estimate from expense categories instead of trying to apply one average to your savings. Start with the costs you expect to pay in a typical year, then list less predictable needs separately. This makes the assumptions visible and easier to update.

Coverage premiums

Include the premiums you expect to pay for health coverage before and after Medicare eligibility. If you retire before you can enroll in Medicare, identify how you will obtain coverage for that bridge period and what it may cost. For Medicare, your choice of coverage affects the premium structure and the way you pay for covered services. Do not assume that the premium is your total healthcare budget.

Out-of-pocket medical costs

Estimate the deductibles, copayments, and coinsurance that may apply when you receive care. Your actual use of services will vary, so it can help to build a typical-use estimate and a higher-use scenario rather than pretending to know one exact figure. Review any available plan documents for the coverage period and keep the assumptions with your budget.

Prescriptions and routine care

Consider prescription expenses, regular appointments, tests, and other recurring care that applies to your circumstances. If you currently have employer coverage, review recent claims or spending records as a starting point, but do not assume that the same coverage or costs will continue after retirement.

Dental, vision, and hearing needs

List these separately rather than assuming a general medical estimate covers them. Coverage and out-of-pocket responsibilities vary by plan and service. Include recurring care you anticipate as well as a reasonable allowance for expenses that do not occur every year.

Long-term care and support

Long-term care is a separate planning question from routine medical spending. It may involve paid help at home, assisted living, or other support, depending on a person’s needs and circumstances. Costs, duration, and the source of care are uncertain. Avoid adding a single assumed lifetime bill as if it were inevitable; instead, discuss what resources, family support, insurance, or other choices could be available under different situations.

One practical way to make the categories more complete is to review a recent year of household records. Gather premium statements, explanation-of-benefits documents, prescription receipts, and bills for services that were not covered. Sort each item into a category, and mark whether it is recurring, occasional, or tied to a specific event. If a cost was paid from a health savings account or another dedicated resource, record the expense once and note the funding source separately. That distinction helps keep a budget from counting the same medical bill as both an expense and an additional reserve need.

Then note which amounts are known and which still need checking. A current premium may be documented, while future plan costs or care needs remain uncertain. Keeping the source and date beside each assumption makes later updates easier: you can replace an outdated figure without rebuilding the entire estimate. This record also helps you ask a coverage provider a precise question rather than relying on a broad lifetime average.

Integrative Planning’s healthcare planning overview discusses coordinating healthcare choices with retirement decisions. A broader RetireRight™ planning process can also help connect healthcare assumptions with the rest of a plan.

Why Can Two Retirement Healthcare Estimates Look So Different?

Estimates can diverge because they answer different questions. One may represent an individual, another a couple. One may cover a single year, while another projects total costs over an assumed retirement. Some figures include premiums; others emphasize out-of-pocket medical expenses. A projection may also use a different inflation assumption, coverage mix, or expected pattern of care.

Use a published estimate to prompt questions, not to choose a savings target by itself. If you are comparing reports, write down their date, population, time frame, covered services, and price assumptions. When an important detail is missing, treat the number cautiously rather than filling in the blank with an assumption.

A simple comparison worksheet can make this review concrete. Put each estimate in its own column, then record whether it is individual or household-based, its measurement period, the expense categories included, and its dollar-year basis. Leave a cell blank or mark it unknown when the source does not say. Do not assume that an absent detail means a cost is included. The worksheet can show that two estimates differ because one includes premiums and the other does not, or because one represents a full retirement projection while the other gives a narrower measure.

This exercise is also useful when an estimate is presented as a single headline number. Read any methodology notes available and identify the assumptions that matter most to your own circumstances. If the method is not clear, use the figure as context only. A more modest estimate with transparent assumptions may be more useful for planning than a larger number that cannot be explained.

How Can You Build a Retirement Healthcare Budget?

A useful budget is a working model. It does not need to predict every appointment or future health event. It should show what you know, what remains uncertain, and how those costs fit with your sources of retirement income.

1. Set the timeline. Note your expected retirement date, the date you may qualify for Medicare, and any period when you will need other coverage. If you and a spouse or partner have different timelines, model each person separately.
2. Inventory current coverage and spending. Gather plan summaries, premium information, recent medical and prescription spending, and any records relevant to anticipated care. Use these as a baseline, not as a promise that future costs will match.
3. Separate the categories. List premiums, expected out-of-pocket medical care, prescriptions, dental and vision needs, and potential long-term care as distinct lines. This helps you see what is included and prevents double counting.
4. Build at least two scenarios. Create a routine-use case and a higher-cost case. State what changes between them, such as greater use of covered care or a different coverage choice. The scenarios should be plausible planning tools, not predictions or guarantees.
5. Identify how you would pay. Consider how healthcare expenses interact with Social Security, pension income, portfolio withdrawals, cash reserves, and other resources. The question is not only how large a cost might be, but when it could occur and which source may fund it.
6. Review tax interactions. Healthcare choices and income decisions can interact with taxes and Medicare-related costs. Consider them in the same multi-year plan rather than making a coverage or withdrawal decision in isolation.
7. Choose review triggers. Revisit the estimate when you retire, change coverage, move, experience a major health or family change, or receive updated plan information. A regular annual review can also catch assumptions that have become outdated.

For example, imagine a household where one person plans to leave work before the other. Rather than assigning one combined healthcare number to the household, start a separate timeline for each person. Mark the end of current employer coverage, identify the coverage that may apply next, and list which regular costs remain attached to each person. Then combine the two timelines to see whether there is a period when coverage arrangements differ. This is a planning illustration, not a statement about which option a household should choose.

Next, compare a routine year with a higher-use year. Keep the known items, such as documented premium amounts, in both scenarios. Change only the assumptions that reasonably vary, such as out-of-pocket care or the timing of a planned coverage transition. Write a short note explaining each change. That makes the difference between the scenarios understandable and helps you avoid making the higher-cost case seem like a guaranteed outcome.

Finally, connect the annual budget to a longer time horizon. Some expenses are paid every month, while others occur unevenly or are tied to a transition. A year-by-year view can show when costs might rise or fall rather than flattening everything into one lifetime total. Keep today’s known values distinct from future estimates, and update the projection when verified information becomes available. The result is a flexible planning tool, not a precise bill forecast.

For the income side of the exercise, connect the estimate to your retirement income plan. If healthcare spending could affect when or how you draw from investments, evaluate it alongside your investment approach, rather than treating the medical budget as an isolated worksheet.

How Do Coverage, Timing, and Household Needs Affect Your Estimate?

Your retirement date can shape both the timing and the type of coverage you need. Someone leaving work before Medicare eligibility should plan for the bridge years instead of starting a budget at age 65. Someone already eligible still needs to compare available coverage and understand how premiums and cost-sharing apply to expected care. Enrollment rules and plan details can change, so verify current information when making a decision.

Household members may not share the same coverage, health needs, or retirement date. Model each person’s expenses separately, then combine them into a household view. This approach can make it easier to identify a period when one person has employer or other coverage while another relies on a different option.

Location and care preferences matter too. A move, a change in access to providers, or a preference for receiving help at home could alter the assumptions in your plan. That does not mean a particular choice will lead to a known cost; it means the budget should reflect the choices and uncertainties that are relevant to your family.

For people approaching retirement, a retirement transition checklist can help keep coverage decisions on the same timeline as other tasks. You can also review Medigap and Medicare Advantage considerations as part of learning how different coverage choices work. Confirm current plan terms and eligibility with the relevant providers before enrolling.

How Does Healthcare Spending Fit With Taxes and Retirement Income?

Healthcare costs are not only a line in a spending plan. The timing and source of income used to pay them can affect the broader financial picture. For example, retirement income may come from a mix of Social Security, pensions, taxable accounts, tax-deferred accounts, and other resources. A distribution decision that looks straightforward in one year may have consequences when considered across several years.

That is one reason to coordinate healthcare assumptions with tax planning. Review projected income and withdrawals over time, and assess how Medicare-related income thresholds may affect your situation. Do not rely on a general article or a single estimate to determine your personal tax or coverage outcome; use current rules and your own records.

Integrative Planning’s retirement tax planning page describes the role of multi-year tax strategy. The goal is to consider income, taxes, investments, and healthcare together, not to suggest that a particular sequence or product fits everyone.

What Common Estimating Mistakes Should You Avoid?

• Treating an average as a personal bill. A national projection may not match your health, coverage, household, or retirement length.
• Leaving out the years before Medicare. If you expect to stop working earlier, include the coverage period before Medicare eligibility.
• Counting premiums but not care, or care but not premiums. Define each line and check the source estimate so you know what it includes.
• Assuming every medical cost is covered. Review plan terms and consider expenses such as dental, vision, and prescriptions separately.
• Using one scenario only. A single-point estimate can hide how an unusually costly year might affect cash flow.
• Adding long-term care as a certainty. It is important to plan for uncertainty without presenting one possible outcome as inevitable.
• Forgetting to update the model. Coverage, income, household circumstances, and assumptions change. An old estimate can quietly become less useful.

When the details feel complex, a coordinated review can help you identify which assumptions need verification and how the expense fits into your wider plan. Learn more about comprehensive wealth management and the firm’s approach to coordinating financial planning decisions.

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