Healthcare in retirement: Medicare and beyond

Healthcare is the most underestimated retirement expense. Even with Medicare, the average retired couple spends an estimated $300,000+ on healthcare over retirement — premiums, deductibles, prescription drugs, and out-of-pocket costs. Planning for it is not optional.

Medicare's parts, plainly

• Part A — hospital insurance. Most people pay nothing for this because payroll taxes funded it during their working years.
• Part B — medical insurance (doctors, outpatient, preventive). Standard 2025 premium around $175/month, more for high earners.
• Part C — Medicare Advantage. A private-sector bundle that replaces A and B with different tradeoffs. Often includes extras like dental and vision.
• Part D — prescription drug coverage. Standalone plan you buy in addition to original Medicare.
• Medigap (supplemental) — covers costs original Medicare doesn't, like deductibles and coinsurance. Not compatible with Medicare Advantage.

The pre-65 problem

If you want to retire before 65, you need to bridge health coverage until Medicare kicks in. Options: ACA marketplace (subsidies scale with income, so retirees with low taxable income can qualify for generous subsidies), COBRA from your former employer (expensive but immediate), or spouse's employer plan. This bridge can cost $10,000+/year per person — factor it into your retirement number.

Long-term care

Neither Medicare nor most health insurance covers long-term care (nursing home, in-home care for chronic conditions). 70% of people over 65 will eventually need some form of long-term care. Options: self-insure from your retirement savings (requires a much larger portfolio), long-term care insurance (expensive but increasingly offered as hybrid life/LTC policies), or rely on Medicaid (only after spending down most of your assets). No option is good, but ignoring the question is worst.