Health Care Costs in Retirement: How to Plan and Protect Your Savings
Health care costs in retirement include Medicare premiums, deductibles, prescription drugs, insurance premiums, copayments, and services not fully covered by insurance. Fidelity’s 2026 estimate projects that a person retiring at age 65 in 2026 will spend an average of $185,500 on health care throughout retirement, excluding long-term care. Actual costs vary by individual.
Key takeaways
- Health care can be a major expense in retirement, even with Medicare coverage.
- Fidelity estimates that one person retiring at age 65 in 2026 may spend $185,500 on health care throughout retirement, excluding long-term care.
- Plan for Medicare premiums, deductibles, prescription drugs, and medical expenses not covered by insurance.
- You can use HSA funds for certain medical expenses and eligible Medicare premiums after retirement, but some restrictions apply.
- Healthy habits, preventive care, and early financial planning can help you prepare for future health care expenses.
Table of Contents
How Much Does Health Care Cost in Retirement?
The average medical costs in retirement can be substantial, but there is no single amount that applies to everyone. Your total expenses depend on your health, retirement age, life expectancy, insurance choices, prescription needs, location, and the services you use.
According to Fidelity Investments’ 2026 Retiree Health Care Cost Estimate, a 65-year-old retiring in 2026 can expect to spend an average of $185,500 on health care and medical expenses throughout retirement. This estimate is for one person and is based on Original Medicare coverage, including Parts A and B, Medicare Part D prescription drug coverage, and certain out-of-pocket medical expenses.
Fidelity’s estimate does not include long-term care expenses. It also does not represent a guaranteed cost or the exact amount every retiree needs to save. Your actual expenses could be higher or lower depending on your circumstances.
For perspective, Fidelity’s 2025 estimate was $172,500 for one person retiring at age 65 that year. The updated 2026 figure is $185,500. These are estimates for different retirement cohorts, not a prediction that every individual’s expenses will increase by the same amount.
Source: Fidelity Investments’ 2026 Retiree Health Care Cost Estimate.
The practical takeaway is simple: include health care in your retirement budget before deciding how much you can afford to spend on housing, travel, hobbies, and other goals. A realistic estimate can help you identify potential shortfalls while you still have time to adjust your savings and retirement-income strategy.
What Do Health Care Costs in Retirement Include?
Healthcare in retirement involves more than paying an insurance premium. Even when you have Medicare or another health insurance plan, you may still pay part of the cost of covered services and the full cost of certain excluded services.
Consider these common expense categories when building your retirement budget:
| Expense category | What it may include | Planning consideration |
|---|---|---|
| Insurance premiums | Medicare Parts B and D, Medicare Advantage, supplemental coverage, or other eligible insurance plans | Budget for recurring premiums and potential changes over time. |
| Deductibles and copayments | Amounts you pay before insurance starts sharing costs or when you receive covered services | Review your plan’s deductible and cost-sharing rules. |
| Prescription drugs | Copayments, coinsurance, and costs not covered by your prescription drug plan | Check your plan’s formulary, pharmacy network, and annual cost estimates. |
| Dental, vision, and hearing | Routine dental care, glasses, hearing aids, and other services that may not be covered by Original Medicare | Budget separately for services you expect to need. |
| Long-term care | Extended assistance with daily activities, including certain home-based and residential care | Assess this separately because it can represent a significant additional expense. |
Original Medicare generally does not cover most routine dental services or long-term custodial care. Coverage for other services varies, so review the details of your plan rather than assuming all medical needs will be paid for.
Can You Use an HSA for Health Insurance Premiums After Retirement?
Yes, in certain circumstances. If you have money in a Health Savings Account (HSA), you can generally use it tax-free for qualified medical expenses in retirement. After you turn 65, HSA funds can also be used for certain health insurance premiums, including Medicare premiums, but not Medigap premiums. The rules for contributions are different from the rules for withdrawals.
What is a Health Savings Account?
An HSA is a tax-advantaged account available to eligible individuals who meet the requirements for HSA contributions, including having qualifying high-deductible health plan coverage and meeting other IRS rules. The account belongs to you, and unused money generally carries over from year to year.
Qualified medical expenses can include eligible medical, dental, and vision costs that have not been reimbursed by insurance or another source. Tax-free withdrawals can help you pay eligible expenses without using as much of your other retirement income.
Which insurance premiums can an HSA pay after age 65?
- Medicare premiums: Eligible premiums for Medicare Part A, Part B, and Part D can generally be paid with HSA funds after age 65.
- Medicare Advantage: Premiums for Medicare Advantage coverage can generally qualify.
- Medigap: Medicare supplemental insurance premiums are not qualified HSA expenses.
- Other health insurance: Ordinary health insurance premiums generally do not qualify, except for specific IRS exceptions, such as qualifying COBRA coverage or coverage while receiving unemployment compensation.
- Long-term care insurance: Eligible premiums may qualify, subject to IRS limits that vary by age and are adjusted periodically.
Can you contribute to an HSA after age 65?
Turning 65 does not, by itself, prohibit HSA contributions. However, you generally cannot contribute for months in which you are enrolled in Medicare. If Medicare coverage is retroactive, contributions made for affected months may be excess contributions and could create tax consequences. Check your Medicare effective date and contribution eligibility before making further deposits.
After age 65, withdrawals for nonqualified expenses are generally subject to ordinary income tax, but the additional 20% tax that normally applies to nonqualified HSA withdrawals no longer applies. Withdrawals for qualified medical expenses remain tax-free.
Before using HSA funds, confirm that the expense qualifies and retain receipts and records. For details, see IRS Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans.
5 Steps to Plan for Health Care Costs in Retirement
You cannot predict every health issue you may face, but you can take practical steps to prepare for retirement health care expenses. Combine the following health habits with a financial plan that accounts for insurance, routine care, and unexpected bills.
1. Stay informed about your health and coverage
Talk with your health care providers about recommended screenings, family health risks, and preventive care. At the same time, review your insurance coverage regularly. Understand what your plan covers, which providers are in-network, what medications are covered, and how much you may have to pay yourself.
Review coverage when you approach retirement, become eligible for Medicare, or experience a major change in employment or family circumstances.
2. Build and maintain healthy habits
Healthy habits can support your overall well-being, although they cannot guarantee that you will avoid illness or reduce every future medical expense. Consider practical steps such as:
- Eating a balanced diet that includes fruits, vegetables, and whole grains.
- Staying physically active at a level appropriate for your abilities.
- Following your health care provider’s recommendations for exercise and other lifestyle changes.
- Keeping routine medical appointments and discussing health concerns early.
Choose habits you can maintain over time instead of relying on short-term changes.
3. Manage stress and maintain social connections
Retirement can bring changes in routine, work, finances, and relationships. Staying connected with friends and family, pursuing hobbies, and making time for enjoyable activities can support emotional well-being. If stress or mood changes affect your daily life, consider discussing them with a qualified health professional.
These habits are valuable for overall well-being, but they should not be treated as guaranteed ways to prevent specific diseases or future health care costs.
4. Know your important health numbers
Work with your health care provider to monitor health measures that are appropriate for you. Depending on your circumstances, these may include:
- Blood pressure.
- Cholesterol levels.
- Blood glucose levels.
- Weight or body mass index (BMI), when clinically appropriate.
These measures can help your provider assess certain health risks and determine whether additional evaluation or treatment is appropriate. The right monitoring schedule depends on your age, health history, and individual needs.
5. Make use of appropriate preventive care
Ask your health care provider which screenings, vaccinations, and preventive services are recommended for you. Eligible Medicare beneficiaries may receive certain preventive services with no coinsurance or deductible when coverage requirements are met. However, costs can apply when a service is diagnostic, falls outside coverage rules, or involves additional treatment.
Confirm the service’s coverage and any potential charges before an appointment when possible. Preventive care is an important part of managing your health, but it cannot eliminate the possibility of future medical expenses.
Building Health Care Costs Into Your Retirement Plan
A health care budget is most useful when it is connected to your wider retirement-income plan. Rather than relying on one national average, estimate your likely expenses based on your retirement date, insurance choices, health needs, and available resources.
Create a practical health care budget
- Estimate recurring premiums. Include expected Medicare premiums, supplemental coverage, or other insurance costs applicable to your situation.
- Allow for out-of-pocket expenses. Budget for deductibles, copayments, prescriptions, and routine dental, vision, or hearing costs not fully covered by your plan.
- Review your savings options. Consider how your HSA, cash reserves, and other retirement assets may help cover eligible or unexpected expenses.
- Assess long-term care separately. Medicare generally does not cover most long-term custodial care. Explore how you might fund care if you need ongoing help with daily activities.
- Revisit the plan regularly. Update estimates when premiums, health needs, coverage, or retirement income changes.
There is no universal savings target that guarantees sufficient funds for every retiree. Your plan should reflect your personal circumstances and the level of financial flexibility you want during retirement.
For people planning to retire in Fort Myers or elsewhere in Southwest Florida, it is worth comparing expected health care costs with the insurance options, providers, and retirement resources available to them. Local costs and coverage options can differ, so use estimates relevant to your circumstances rather than assuming a national average will match your budget.
For related information, explore healthcare resources and consider how future housing or care needs may affect your financial plan.
If you work with a fee-only fiduciary financial advisor, discuss health care costs before finalizing your retirement date or income strategy. A comprehensive plan can help you evaluate medical spending alongside your other financial goals without assuming that future expenses will be predictable.
Planning your retirement in Fort Myers or Southwest Florida? ASOFSP can help you consider health care expenses as part of your broader financial picture. Contact The Art and Science of Successful Planning to discuss your retirement planning needs and how health care costs fit into your financial goals.
Disclaimer: This article provides general educational information and is not individualized financial, investment, tax, legal, medical, or insurance advice. Health care costs, Medicare coverage, and HSA tax rules can change. Consult the relevant government resources and qualified professionals before making decisions based on your individual circumstances.
Frequently Asked Questions
How much should I save for health care costs in retirement?
There is no single savings target that fits everyone. Fidelity's 2026 estimate projects $185,500 in lifetime health care expenses for one person retiring at age 65 in 2026, excluding long-term care. Use this as a broad reference, then estimate your own premiums, out-of-pocket costs, prescriptions, and potential care needs based on your circumstances.
Does Medicare cover all health care costs in retirement?
No. Medicare helps pay for many covered medical services, but beneficiaries may still owe premiums, deductibles, copayments, and coinsurance. Original Medicare generally does not cover most routine dental care or long-term custodial care. Your actual costs depend on your coverage, income, health needs, and whether you have supplemental insurance or a Medicare Advantage plan.
Can you use an HSA for health insurance premiums after retirement?
Yes, certain premiums can qualify. After age 65, HSA funds may generally be used tax-free for eligible Medicare Part A, Part B, Part D, and Medicare Advantage premiums. Medigap premiums do not qualify. Other health insurance premiums generally qualify only under specific exceptions, such as eligible COBRA coverage or coverage while receiving unemployment compensation.
Can I contribute to an HSA after age 65?
Possibly. Turning 65 alone does not automatically prevent HSA contributions, but you generally cannot contribute for months when you are enrolled in Medicare. Retroactive Medicare coverage can affect contribution eligibility, so check your effective date before contributing. You can generally keep and use an existing HSA after retirement, subject to the usual rules for qualified medical expenses.
Does Medicare pay for long-term care in retirement?
Medicare generally does not pay for long-term custodial care, such as ongoing help with bathing, dressing, or other daily activities. It may cover certain skilled nursing facility or home health services when specific requirements are met, but those benefits are not the same as long-term custodial care. Consider how you would fund extended care if you need it.
