Cost of Healthcare in Retirement (2026 Edition)
Margaret had it all figured out. At 66, she would collect $1,920 monthly from Social Security. Her modest pension would add another $850. Between the two, she’d have $2,770 coming in each month, which she calculated would cover her basic living expenses comfortably.
Then, she got her first Medicare premium notice. Part B would cost her $202.90 per month.[1] She also needed Part D prescription drug coverage, close to another $40 monthly. Her Medicare Supplement plan to cover gaps was $180 monthly. Before she filled a single prescription or saw a doctor even once, healthcare was eating hundreds of dollars off her monthly income.
I didn’t realize it would cost this much,” she said, staring at the bills. “I thought Medicare was supposed to make healthcare affordable.”
Healthcare is one of the largest and fastest-growing expenses in retirement, yet it’s one of the most underestimated costs in retirement planning.
2026 Medicare Reality
According to the Centers for Medicare and Medicaid Services, the standard monthly premium for Medicare Part B in 2026 is $202.90, an increase of $17.90 from in 2025. That’s almost a 10% jump in one year.
The annual Part B deductible also increased to $283 for 2026, up from $257 in 2025.
Medicare Part A, which covers hospital stays, has a deductible of $1,736 per benefit period in 2026, up $60 from 2025. If you’re hospitalized for more than 60 days, you’ll pay hundreds more each day.
These are just the baseline costs. Many retirees pay significantly more due to income-related adjustments and supplemental coverage needs.
“Healthcare costs can catch people by surprise,” says Rafe Klein, Senior Vice President at David Lerner Associates.
“They retire, convert a large IRA to Roth, or take a big distribution, and two years later their Medicare premiums can increase dramatically. Maybe double or even triple. Healthcare costs are often unavoidable, but they can be prepared for.”
The Total Healthcare Cost Picture
Medicare premiums are only the tip of the healthcare iceberg. The real cost of healthcare in retirement includes:
Medicare premiums:
Part B ($202.90+ monthly), Part D ($40-80 typical monthly), and often a Medicare Supplement or Medicare Advantage plan.
Out-of-pocket costs:
Copays, coinsurance, deductibles. Even with good coverage, expect annual out-of-pocket expenses.
Dental, vision, and hearing:
Medicare doesn’t cover these. Expect to spend money on routine care, more if you need major work like crowns, implants, or hearing aids.
Long-term care:
Medicare covers very limited nursing home or home health care.
Strategies to Manage Healthcare Costs
Despite these daunting numbers, there are ways to manage healthcare expenses in retirement:
Understand your Medicare options.
Original Medicare with a Medicare Supplement plan offers broad provider choice but can be expensive. Medicare Advantage plans often have lower premiums but restricted networks. Compare carefully based on your health needs and preferred doctors.
Use Health Savings Accounts strategically.
If you contributed to an HSA during your working years, those funds can be withdrawn tax-free for medical expenses in retirement. An HSA is one of the few accounts with triple tax benefits.
Manage IRMAA exposure.
If you’re close to an Income-Related Monthly Adjustment Amount (IRMAA) threshold, strategies like spreading IRA distributions over multiple years, doing Roth conversions in low-income years before Medicare, or managing capital gains timing can help avoid or reduce IRMAA surcharges.
Factor healthcare into withdrawal strategy.
Many retirees underestimate healthcare costs in their calculations. Build in realistic healthcare expense projections that increase with age and inflation.
Consider long-term care insurance.
While expensive, long-term care insurance purchased in your 50s or early 60s can protect against catastrophic costs. Traditional policies are pricey; hybrid life insurance policies with long-term care riders can be more affordable.
Maximize preventive care.
Medicare covers many preventive services at no cost. Annual wellness visits, cancer screenings, diabetes prevention programs, and cardiovascular disease screening are all fully covered.
Planning for Increasing Costs
Healthcare costs don’t stay flat in retirement. They increase as you age, both because healthcare inflation typically exceeds general inflation and because you use more healthcare services as you get older. Having a plan for how you’ll pay for it is essential.
The Bottom Line
Healthcare is not a minor retirement expense you can ignore or significantly underestimate. For many retirees, it’s the second-largest expense after housing, and it grows faster than inflation.
Factor realistic healthcare costs into your retirement planning. Include Medicare premiums, supplemental insurance, out-of-pocket costs, dental and vision care, and potential long-term care needs. You need to know what you’re getting into.
Material contained in this article is provided for information purposes only. It is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. These materials are provided for general information and educational purposes, based on publicly available information from sources believed to be reliable. We cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
The subject of this article is fictitious and created for illustrative purposes only. It is based on events of a similar nature and should not be interpreted as a direct depiction of any specific individual, organization, or incident. Any resemblance to actual persons, living or deceased, or actual events is purely coincidental.