Health Care Costs in Retirement: the Real Numbers

Health care is the retirement expense people most consistently underestimate, partly because Medicare's branding suggests the problem is solved at 65. It is not: Medicare has premiums, deductibles, and gaps, notably dental, vision, hearing, and above all long-term care. Credible estimates put a 65-year-old couple's lifetime out-of-pocket health costs, excluding long-term care, in the several-hundred-thousand-dollar range.

The costs are manageable when planned and corrosive when discovered. Here is the map.

What Medicare Actually Costs

Part A (hospital) is premium-free for most; Part B (outpatient) carries a monthly premium set annually; Part D covers drugs with its own premium. Most retirees add either a Medigap supplement plus Part D, higher premium, minimal surprise bills, broad provider access, or a Medicare Advantage plan, lower premium, network limits, more cost-sharing. A realistic all-in budget for a couple, premiums plus routine out-of-pocket, commonly runs several hundred dollars per person per month. Current figures live at medicare.gov.

IRMAA: the Tax Shaped Like a Premium

Higher-income retirees pay income-related surcharges on Parts B and D, keyed to modified adjusted gross income from two years earlier and applied in cliffs: one dollar over a threshold raises both spouses' premiums for a full year, potentially by thousands. Every income decision in retirement, Roth conversions, capital gains, withdrawal sequencing, now casts a two-year IRMAA shadow. The flip side: Roth balances built earlier let you fund spending without raising the income that triggers surcharges, and life-change appeals exist for retirement-year cliffs.

The Long-term Care Question

Roughly half of 65-year-olds will need some paid long-term care; most needs are short, but the tail is severe, memory care can run well past $100,000 a year, and Medicare does not cover custodial care. The funding options: traditional LTC insurance (cheaper, use-it-or-lose-it, premium risk), hybrid life/LTC policies (costlier, benefits either way), or self-funding with earmarked assets, sensible for wealthier households that can absorb the tail. What fails is silence: a plan that never names its long-term-care answer is incomplete. Our insurance and protection work covers this decision in depth.

Pre-funding the Whole Thing

The best-positioned retirees arrive with three assets: a fat HSA built and invested during working years, tax-free for premiums (except Medigap) and care costs; Roth balances that fund spending without IRMAA consequences; and an explicit long-term-care answer. Before 65, early retirees need an ACA bridge plan, where managing taxable income for subsidies is its own art.

Health costs are a planning problem, not a mystery; the Wealth Checkup will show whether yours is provisioned.

Tony Colunga · Founder, Attend Wealth

Tony leads Attend Wealth, a fee-based wealth management firm in Atlanta serving professionals, families, and business owners. Advisory services are held to a fiduciary standard. More about Attend