Healthcare remains one of the largest and fastest-rising expenses for retirees.
As medical inflation continues to outpace general inflation, retirees are spending a growing share of their income on premiums, prescriptions, and out-of-pocket costs. Recent research shows that Medicare Part B and D premiums and cost sharing alone account for nearly a quarter of the average retiree’s monthly Social Security benefits—reinforcing how essential it is to plan ahead. [investopedia.com]
How Much Are Retirees Spending on Healthcare Today?
Fidelity’s most recent Retiree Health Care Cost Estimate (2025) reports that a 65-year-old retiring in 2025 will need an average of $172,500 to cover healthcare expenses throughout retirement—a 4% increase over the prior year, reflecting a steady upward trend heading into 2026. While this is not a 2026-specific number, it represents the most current national benchmark available and replaces the older $157,500 estimate often cited in prior years. [planadviser.com]
Rising Medicare premiums further strain retiree budgets. In 2026, the Medicare Part B premium is projected to increase from $185 to $202.90 per month—a 9.7% jump that will consume roughly one-third of the average retiree’s Social Security cost-of-living adjustment (COLA) increase. [tcf.org]
Additionally, the Part B deductible is projected to rise from $257 to $288 (+11.2%), and Medicare Part D base premiums are expected to reach $38.99/month in 2026. [consumeraffairs.com]
Strategies to Prepare for Healthcare Costs in Retirement
1. Health Savings Accounts (HSAs)
HSAs remain one of the most powerful tools for retirement healthcare planning. They offer:
- Tax-deductible contributions
- Tax-free growth
- Tax-free withdrawals for qualified medical expenses
Because Medicare premiums can be reimbursed tax-free from an HSA at any time, retirees can allow HSA balances to grow for years and reimburse themselves later—as long as receipts are retained. One key rule: expenses incurred before opening the HSA are not eligible for reimbursement.
Given rising Medicare costs and long-term medical inflation, HSAs are increasingly valuable for future retirees.
2. Medicare: Understand Your Options Before Age 65
Your Medicare Initial Enrollment Period spans seven months—beginning three months before the month you turn 65. Understanding your options is crucial:
- Medicare Part A: Hospital, skilled nursing, and hospice care
- Medicare Part B: Doctor visits, outpatient care, preventive care
- Medicare Part D: Prescription drugs
- Medigap: Supplements Parts A & B by covering deductibles, coinsurance, and gaps
- Medicare Advantage (Part C): All-in-one private plans covering A, B, and often drug coverage
With Medicare premium increases outpacing COLA growth—Medicare’s 2026 Part B premium hike alone consumes 33% of the COLA increase—reviewing and adjusting coverage annually is more important than ever. Consulting with a licensed Medicare specialist is strongly recommended. [tcf.org]
3. Long-Term Care Costs: Updated 2026 Estimates
Long-term care is typically not covered by Medicare or Medigap, and the costs can be the most significant expense a retiree faces.
2026 Nursing Home Costs
- Nationwide average cost for a shared room (2026): $327/day, or about $119,340 per year
[medicaidpl...stance.org]
For private rooms, the most recent national median shows:
- Private room (2024 national median): $10,646/month
[carescout.com]
While the private-room data is from 2024, it represents the latest national median available and is still relevant for 2026 planning.
Should You Consider Long-Term Care Insurance?
Before purchasing a policy, evaluate:
- Life expectancy
- Premium cost and inflation protection
- Whether you want to preserve assets for heirs
- Other assets or income streams available to self-fund care (retirement accounts, real estate, pensions, etc.)
4. Using Retirement Accounts and Other Assets
Many near-retirees and retirees earmark assets specifically for healthcare costs. This should be a required part of every retirement plan given that healthcare is now one of the top expenses in retirement.
When allocating assets:
- Consider the tax impact of withdrawals from IRAs, 401(k)s, or taxable accounts
- Project future medical inflation, which consistently runs above general CPI
- Stress-test scenarios that include unexpected medical needs or long-term care
Even modest increases in Medicare premiums, drug costs, and long-term care pricing can meaningfully impact long-term sustainability.
Closing Thoughts
Healthcare costs continue to rise sharply, with retirees dedicating increasing portions of their income—especially Social Security—to medical expenses. Using updated 2026 numbers, it’s clear that proactively planning through HSAs, thoughtful Medicare decisions, possible long-term care insurance, and strategic asset allocation is essential.
Together, we can work to keep you on-track toward your financial goals.
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Read more articles by Ryan Johnson