National averages for retirement healthcare costs — the six-figure lifetime numbers you've seen in headlines — are essentially useless for your plan. Your number depends on coverage choice, health status, income bracket (through IRMAA), state of residence, and whether you retire before or after 65. Here's how to build a personalized number and where to fund it from.
The three phases of retirement healthcare
Pre-65. The most expensive phase per year. Options: COBRA (up to 18 months, full unsubsidized premium plus a 2% administrative fee, but the same network you had at work), the ACA marketplace, or spousal coverage from a still-working partner. Note that the enhanced ACA premium subsidies from the American Rescue Plan expired at the end of 2025, and the pre-2021 subsidy structure with a hard cliff at 400% of the Federal Poverty Level is back in effect for 2026 — model your income carefully near that cliff. Retirees who leave a large employer at 60 routinely see healthcare costs jump from $200/month to $2,000+/month.
65–75. Medicare years with relatively predictable costs — Part B premium, a Medigap or Advantage plan, Part D drug coverage, and out-of-pocket exposure that depends on which path you chose at 65. IRMAA is the variable that catches most affluent retirees off guard.
75+. Premiums stay similar, but out-of-pocket exposure begins to matter more, and long-term care risk becomes the dominant financial concern. This is a different phase with different funding rules.
Building your personalized number
Start with predictable annual costs. For a Medicare-eligible couple with a middle-tier Medigap Plan G and standalone Part D, budget roughly $750–$1,000/month total across both spouses in 2026 (Part B premium + Medigap + Part D + typical dental/vision). Add IRMAA if your income triggers it.
Add expected out-of-pocket. On Original Medicare with Plan G, the annual Part B deductible ($283 in 2026) is essentially your ceiling for outpatient care; Plan G covers the rest. On Medicare Advantage, budget the plan's stated out-of-pocket maximum (often $3,000–$9,000 per person) as a realistic bad-year number.
Add pre-65 gap coverage separately if you're retiring earlier. This is often the single largest healthcare line item in a retirement plan.
Layer in a long-term care reserve — or an insurance product to transfer the risk. See below.
The IRMAA interaction
Above income thresholds (around $109k single / $218k MFJ in 2026), Medicare surcharges Parts B and D. The tiers are cliffs — one dollar over adds roughly $1,000+ per person per year at the first tier alone.
This changes how we sequence withdrawals. Roth conversions, capital gains harvesting, and large one-time distributions all need to be planned against IRMAA thresholds, not just against tax brackets.
A one-time income event (home sale, inheritance liquidation, business sale) can trigger IRMAA two years later. Sometimes the right move is to accept it; sometimes there's a clean workaround; almost always it should be modeled in advance.
Funding sources, in order
Health Savings Account (HSA) balances if you have them. Triple tax-advantaged: deductible going in, tax-free growth, tax-free withdrawals for qualified medical expenses at any age. This is the best account in the tax code for retirement healthcare. If you have one, don't spend it during working years — invest it and let it compound.
Taxable brokerage. Flexible, doesn't affect IRMAA (only realized gains do), and step-up in basis at death makes it efficient for legacy.
Roth IRA. Tax-free and doesn't count toward IRMAA. Use for the largest annual medical events.
Traditional IRA. The last resort — every dollar counts as ordinary income and may push you into a higher IRMAA tier, effectively paying a second layer of cost on top of the tax.
Long-term care: the separate decision
About 70% of people over 65 will need some form of long-term care. The median stay is about 2 years; roughly 20% need 5+ years. National median costs in 2026 run roughly $80k/year for assisted living, $115k/year for a semi-private nursing room, and $140k+ in higher-cost states.
Options for handling it: (1) traditional standalone LTC insurance — increasingly expensive and hard to buy above age 65; (2) hybrid life-with-LTC policies — a lump-sum premium buys a death benefit that can be accelerated for care; (3) self-insure from a dedicated bucket carved off the portfolio, typically $250k–$500k held conservatively; or (4) rely on Medicaid, which requires spending down assets and limits care choices.
None of these is universally right. The one universal answer is that doing nothing is not a plan — it's a decision to shift the burden onto a spouse or child.
The retiree who saves the most
Re-shops Part D every year during Open Enrollment (October 15 – December 7). Formularies change annually and the wrong plan can cost $1,000+ extra without any change in medications.
Uses in-network preventive care aggressively — it's free on both Medicare paths.
Maintains an HSA into retirement if eligible and doesn't touch it until later medical events.
Considers a Medigap plan review every 3–5 years — same coverage from different insurers can vary by 20–40% in premium.
Personalize the healthcare number using your coverage choice, income plan, and long-term care approach. Averages will mislead you in both directions.