The short answer
Health care is one of the biggest and most underestimated costs in retirement, and it does not stop at Medicare. Even with Medicare, retirees pay premiums for Part B and often Part D and a supplement, plus deductibles, coinsurance, dental, vision, hearing, and potentially long-term care, which Medicare does not cover. Budgeting realistically for these costs, and for the fact that they tend to rise faster than general inflation, is essential to a durable retirement income plan.
So retirement health care includes far more than Medicare premiums, and underestimating it is a common planning mistake.
What to include in your budget
Account for Medicare Part B premiums, any Part D drug plan and Medigap or Advantage costs, out-of-pocket deductibles and coinsurance, and the dental, vision, and hearing care Medicare largely excludes. Then consider the possibility of long-term care, which can be a major expense not covered by Medicare. Our guide to how much Medicare costs per month covers the recurring premium side.
A complete budget covers premiums, cost-sharing, the gaps Medicare leaves, and the possibility of long-term care.
How to plan for it
Build a realistic annual health care figure into your retirement budget, plan for it to grow faster than general inflation, and consider how income-based costs like higher-income Medicare premiums could affect you. Keeping some flexibility for unexpected medical costs strengthens the plan. Because these costs interact with taxes and income, professional guidance helps. Our retirement income guide covers fitting health care into the overall plan.
The takeaway: budget health care as a major, rising retirement cost that goes well beyond Medicare premiums, including cost-sharing, dental and vision, and possible long-term care.
Frequently Asked Questions
How much does health care cost in retirement?
More than most people expect. Even with Medicare, retirees pay premiums, deductibles, and coinsurance, plus dental, vision, hearing, and potentially long-term care, which Medicare does not cover.
Does Medicare cover all health costs in retirement?
No. Medicare has premiums and cost-sharing and largely excludes routine dental, vision, hearing, and long-term care, so retirees should budget for those separately.
Why do health care costs matter so much in retirement planning?
They are large, tend to rise faster than general inflation, and are commonly underestimated, so budgeting for them realistically is essential to a durable retirement income plan.
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