Cost of Healthcare in Retirement (2025 Guide)
Planning for the cost of healthcare in retirement can be daunting, but there are several things to consider when assessing your projected healthcare costs.
Though Medicare will cover a substantial portion of your healthcare costs in retirement, you’ll still have to cover the cost of premiums, deductibles, copayments, and coinsurance. Without Part D, you’ll also be on the hook for any prescription drugs in retirement. It’s also important to think about the services not covered by Original Medicare, including dental, vision, and hearing, as well as long-term care and nursing home facilities.
In this article, we’ll explain the average costs of medical expenses in retirement, the largest expense categories for seniors, and how to plan your healthcare budget in retirement.
Key takeaways
The average retiree spends around $172,000 on healthcare costs in retirement.
Major categories that can influence healthcare spending in retirement include Medicare premiums and deductibles, prescription drug costs, dental, vision and hearing care, and long-term care.
Making a customized projected healthcare cost plan for your retirement can help you save for your healthcare needs.
Average healthcare costs in retirement
According to Fidelity’s 24th annual Retiree Health Care Cost Estimate, a 65-year-old adult retiring in 2025 will spend an average of $172,000 in health care and medical expenses throughout their retirement. And a fiscal study from 2016 suggests that total spending per year is roughly $1,100 more for women than for men.
Still, healthcare costs in retirement can vary greatly depending on several factors, including health, geographic location, and age.
Factors that influence individual healthcare costs
It’s important to consider the following factors when planning for healthcare costs in retirement:
Health status: The more pre-existing and chronic conditions you have to manage, the higher costs you’ll incur over time.
Location: Local pricing can have a significant impact on your healthcare costs. According to one cross-sectional study from 2022, the five most expensive places for health spending in the U.S. are The Bronx, NY, White Plains, NY, Manhattan, NY, Anchorage, AK, and Huntington, WV.
Lifestyle factors: Research suggests that smoking less and walking more can reduce healthcare costs among the elderly over time, including the cumulative cost of hospitalizations, diagnostic testing, and physician and nursing home visits.
Major healthcare expense categories in retirement
Below, we break down four of the biggest healthcare expense categories in retirement.
Medicare premiums and out-of-pocket costs
Roughly 37% of Americans plan to rely on Medicare to cover their healthcare costs in retirement, but many underestimate how much their premiums and out-of-pocket expenses will incur.
Some of these costs include:
Premiums: Typical Medicare beneficiaries pay between $230-$430 on their monthly premiums (this number does not include the cost of their deductibles, copayments, coinsurance, or prescription drugs).
Deductibles: For 2025, the Part A deductible is $1,676 and Part B deductible is $257. Keep in mind that Medicare Advantage deductibles vary greatly according to each policy.
Copayments: Medicare copayments will vary depending on your coverage and the type of care or service received. For example, the first 60 days in the hospital require no copayment with Medicare Part A, but after 60 days you’ll spend $419 per day from day 61-90.
Coinsurance: With Original Medicare, you can expect to pay a 20% coinsurance rate after meeting your deductible for covered services.
If you have Original Medicare, you can enroll in a Medicare Supplement plan (Medigap) to cover additional healthcare costs. There are 12 Medigap plans to choose from, with an average premium of $150-$200.
Prescription drug expenses
According to data from 2021-2022, 88% of older adults take prescription medication. Another report from 2019 from the Health Policy Institute at Georgetown University shows that people aged 65-79 pay for nearly half of their prescription drug expenses out-of-pocket, amounting to roughly $456 per year.
Medicare Part D plans can help to cover the cost of prescription drugs, but you’ll still have to pay a monthly premium for your plan. And until you meet your deductible, you’ll pay 100% of your drug costs.
Keep in mind that specialty medications and brand-name drugs tend to cost more than generic or more common medications.
Dental, vision, and hearing care costs
Original Medicare does not cover routine dental, vision or hearing care. For this reason, dental procedures, eye exams, eyewear, and hearing aids can add significantly to your annual healthcare expenses.
But deferring these types of care can have an impact on your well-being and long-term healthcare costs, too.
For example, delaying routine dental care can lead to more serious dental issues, like cavities, gum disease, and tooth loss. Not only are these conditions more expensive to treat, they can have ripple effects on other areas of your health. One study found that tooth loss may be linked to a higher risk of cognitive impairment and dementia.
Long-term care and nursing home expenses
One report estimated that more than half of 65-year olds in the U.S. today will require long-term care services in the future, and that the majority of Americans pay for these services out-of-pocket.
The cost of long-term care or nursing home services can vary greatly according to the type of care, the duration of care, and your location.
According to data from 2016, the cost of a semi-private room in a nursing home is $6,844 a month while care in an assisted living facility averages $3,628 per month.
Planning and managing retirement healthcare costs
We can’t predict every healthcare scenario that awaits in our future. But, unfortunately, we know that healthcare costs are on the rise. Taking economic factors like inflation into account is important when planning for retirement healthcare costs.
To plan ahead for your retirement healthcare costs, try building a projected cost of healthcare plan according to your current needs, including any chronic conditions you have and medications you’re currently taking.
For more guidance on how to plan and save for your healthcare expenses in retirement, consider reading one of these expert-recommended guides.
Bottom line
It’s hard to know exactly how much to save for healthcare costs in retirement, but there are four major expense categories to consider: Medicare premiums and out-of-pocket costs, prescription drugs, dental, vision, hearing and other specialty services, and long-term care and nursing home expenses.
Creating a personalized healthcare cost projection and planning ahead can help you stay financially afloat while taking care of your health needs in retirement.
Frequently asked questions
How much should I budget for healthcare in retirement?
Healthcare costs in retirement can vary greatly according to several factors, but you can expect to spend around $172,000 on healthcare throughout retirement.
What healthcare costs does Medicare not cover?
Medicare coverage varies according to whether or not you have Original Medicare, Medicare Advantage, Part D, or Medigap, but Original Medicare (Parts A & B) does not cover prescription drugs, dental, hearing, vision, or long-term or nursing facility care.
How much do prescription drugs cost in retirement?
Prescription drug costs in retirement vary greatly according to how many medications you’re taking, whether you take generic or brand-name drugs, and whether or not your healthcare coverage covers part of or the complete cost of your medications. However, data from 2019 shows that seniors between the ages of 65-79 pay roughly $456 per year on their prescription medications.
Sources
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De Nardi, M., French, E., Jones, J. B., & McCauley, J. (2016). Medical spending of the US elderly. Fiscal Studies, 37(3–4), 717–747. https://doi.org/10.1111/j.1475-5890.2016.12106
Cooper, Z., Stiegman, O., Ndumele, C. D., Staiger, B., & Skinner, J. (2022). Geographical variation in health spending across the US among privately insured individuals and enrollees in Medicaid and Medicare. JAMA Network Open, 5(7), e2222138. https://doi.org/10.1001/jamanetworkopen.2022.22138
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