Most people assume Medicare will take care of the bulk of their healthcare costs in retirement. It won't. A recent Fidelity study found the average retired couple could spend around $345,000 on healthcare throughout retirement, and that figure doesn't even include long-term care. In this post, we walk through what Medicare actually covers, what it leaves out, and what a plan for these costs can look like. If you'd like help building your own strategy, our team offers a free, personalized B.O.S.S. Retirement Blueprint session where we walk through exactly this.
We meet a lot of people who assume that once they turn 65 and enroll in Medicare, their healthcare costs are essentially handled. Medicare Part A and Part B cover hospital and medical care, but there's a lot they leave out. Deductibles, co-pays, dental, vision, and hearing typically aren't covered at all. Prescription drug coverage and Medicare Advantage plans come with their own monthly premiums on top of everything else.
We had a client who came in on her 65th birthday, thrilled to finally be on Medicare because she assumed all of her healthcare costs, including dental and vision, would now be covered. It's a common assumption, and an understandable one. It's also not accurate.
According to a recent Fidelity study, the average retired couple could spend around $345,000 on healthcare expenses throughout retirement. That number can be hard to picture until you break it down: deductibles, co-pays, premiums, and out-of-pocket costs that accumulate year after year, decade after decade.
And that figure doesn't include long-term care, which could add another six figures depending on your circumstances.
Medicare doesn't begin until age 65, which creates what we call the gap years for anyone who retires earlier. Whether it's a health issue, a layoff, or simply deciding you're ready, retiring at 61 or 62 means finding a way to cover healthcare through COBRA or private insurance until Medicare kicks in. Depending on your health and location, this can be a significant cost that a lot of people don't plan for.
According to the Department of Health and Human Services, about 70% of Americans over age 65 will need some form of long-term care. These costs vary quite a bit depending on the type of care and where you live. Based on a recent Genworth study, assisted living runs around $70,800 a year on average, a private room in a skilled nursing facility can run about $127,750 a year, and a home health aide can cost around $77,000 a year.
Most people we sit down with don't have a plan in place for any of this.
Healthcare inflation deserves its own conversation. According to the Health System Tracker, the price of medical care has increased by roughly 121% since 2000, compared to about 86% for consumer goods generally. If a couple is projected to spend $345,000 on healthcare today, that number could look very different ten, twenty, or thirty years from now.
Steve and Karen came to us a couple of years before Steve planned to retire at 62. They had done a lot right: paid off their mortgage, raised their kids, and put away a solid nest egg. But when we walked through their healthcare timeline, we found a three-year gap before Medicare eligibility that they hadn't priced out, along with no plan at all for long-term care.
Together, we built a strategy that accounted for private insurance during the gap years and set aside a dedicated pool of assets for potential long-term care needs, so a future health event wouldn't derail the rest of their plan. Every situation is different, and results depend on individual circumstances, but having a plan in place gave them a much clearer picture of what to expect.
A few starting points worth considering as you build out your own plan:
Get clear on what Medicare Part A and Part B actually cover, and where the gaps are for things like dental, vision, and hearing.
If you're considering retiring before 65, price out what coverage will cost during those gap years.
Think through your options for long-term care, whether that's long-term care insurance, a hybrid life insurance policy, or a dedicated pool of assets set aside specifically for this purpose.
Build healthcare costs into your broader financial plan rather than treating them as an afterthought.
No. Original Medicare does not cover routine dental, vision, or hearing care. Some Medicare Advantage plans may include limited coverage for these, depending on the specific plan.
According to a recent Fidelity study, the average retired couple could spend around $345,000 on healthcare throughout retirement, not including long-term care. Actual costs will vary based on your health, location, and coverage choices.
You'll need to secure coverage through COBRA, a private health plan, or a spouse's plan until you turn 65. This gap can be a meaningful expense depending on your health and situation.
According to the Department of Health and Human Services, about 70% of Americans over 65 will need some form of long-term care during their lifetime.
Healthcare could be one of the largest expenses you face in retirement, and it's one of the easiest to underestimate. The first step is simply acknowledging that it deserves its own place in your financial plan, alongside your income strategy, tax planning, and Social Security decisions.
If you'd like help thinking through what this could look like for your own retirement, our team at B.O.S.S. offers a free, personalized B.O.S.S. Retirement Blueprint session.
Or call us directly: (800) 637-1031
Tyson Thacker is the Co-Founder of B.O.S.S. Retirement Solutions and B.O.S.S. Retirement Advisors, a fiduciary RIA based in Lehi, Utah. Alongside his brother Ryan, Tyson has helped more than 55,000 area families across Utah, Idaho, Washington, and Arizona build retirement income strategies focused on maximizing income, minimizing taxes, and protecting what they've worked a lifetime to build. B.O.S.S. currently manages more than $1 billion in retirement assets across 11 office locations.
Advisory services offered through B.O.S.S. Retirement Advisors, an SEC-Registered Investment Advisor. Insurance products and services offered through B.O.S.S. Retirement Solutions. Information contained in this material is for informational purposes only and is not intended as personalized investment, tax, or legal advice. You should seek advice on legal and tax questions from an independent attorney or tax advisor. Examples and hypothetical scenarios are illustrative only and do not guarantee future results. Actual results may vary. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of any individual. BOSS is not affiliated with the Medicare, the U.S. government, or any government agency.
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