Healthcare in Retirement: A Stage-by-Stage Planning Guide

Here’s a number worth knowing: the average 65-year-old couple retiring today will spend somewhere around $315,000 on healthcare through the rest of their lives – and that doesn’t include long-term care. When you factor that in, the number can double.

You probably already have healthcare in your retirement plan somewhere. Most people do. But what tends to get missed isn’t the expense itself – it’s how healthcare costs interact with everything else. Your portfolio timing, your tax decisions, your withdrawal rate, your options if something changes. Those connections are where the real planning lives, and they look different depending on where you are right now.

We broke this down by stage, so you can jump to where you are right now.

If You’re Still on Employer Coverage

You already know that when you stop working, you’re picking up the full tab. That part isn’t a surprise. What tends to catch people off guard is what those premiums actually do to a portfolio when you’re pulling them in your early 60s – before Medicare kicks in and before you’re taking Social Security. A couple on the open market can easily spend $20,000 to $25,000 a year on coverage alone. That’s money coming out of your investments during the exact window when sequence-of-returns risk matters most. Two or three expensive years early in retirement can do more damage to a portfolio’s long-term trajectory than most people realize – not because of the dollar amount itself, but because of what that money would have done if it had stayed invested.

If early retirement is in your plan, the healthcare bridge to 65 deserves its own line in the spreadsheet, not just a mental note.

If You’re Approaching Medicare

Most people know Medicare isn’t free. But what a lot of people don’t realize is that what you pay for it is directly tied to your income from two years ago. That’s how IRMAA works – the surcharge on your Part B and Part D premiums is based on your modified adjusted gross income from two tax years prior. So a large Roth conversion you do at 63, a capital gain you take at 62, or a high-earning final year of work can quietly push your Medicare premiums up by thousands of dollars a year once you enroll.

That means the Medicare planning window doesn’t start at 65. It starts now – in the income decisions and tax moves you’re making today. This is one of the areas where the connection between your tax strategy and your healthcare costs is tighter than it looks on the surface.

If You’re Already on Medicare

You’ve already been through the enrollment decisions and you know what’s covered and what isn’t. The thing that doesn’t get talked about enough is what the inflation math actually does over a long retirement. Healthcare costs have historically risen at 5-7% a year – roughly double general inflation. Against a portfolio that might be targeting 4% withdrawals, that means healthcare is slowly taking a bigger share of your budget every single year. What was a manageable expense at 68 becomes a much heavier line item at 78, and it tends to accelerate right when other costs – prescriptions, specialists, more frequent care – are climbing too.

It’s not that any single year is unmanageable. It’s that the trend compounds quietly, and if your plan doesn’t account for healthcare growing faster than everything else, the back half of retirement is where it shows up.

Long-Term Care

Everyone knows long-term care is expensive. The part that’s harder to sit with is how few real options there are once you actually need it. In-home care, assisted living, and nursing facilities can run anywhere from $50,000 to well over $100,000 a year – and Medicare covers almost none of it. Medicaid only kicks in once you’ve essentially spent down your assets. So the question isn’t really if you should plan for it – it’s how, and most people don’t have a clear answer.

Long-term care insurance is one route, but it’s gotten more expensive and more selective over the years. Self-insuring is another, but the portfolio you’d need to set aside specifically for that risk is bigger than most people expect. And doing nothing is its own decision – one that usually lands on your family. This isn’t a problem you need to solve today, but it’s one worth having an honest conversation about while you still have the most options.

The Bottom Line

The point of all this isn’t to be alarming. It’s that healthcare is the one retirement expense that’s almost guaranteed to be bigger than you planned for, and the earlier you build that reality into your numbers, the fewer surprises show up later.

If you want to run through what this looks like with your specific numbers, schedule a conversation with Crest Wealth Advisors. It’s one of the most valuable conversations you can have right now.

This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, legal advice, a recommendation for purchase or sale of any security, or investment advisory services. Please consult a financial planner, accountant, and/or legal counsel for advice specific to your situation.