A 65-year-old retiring in 2025 can expect to spend roughly $172,500 on health care and medical expenses over the course of retirement, according to Fidelity’s latest annual estimate. For a couple, that’s $345,000. These figures cover Medicare premiums, copays, prescription drugs, and out-of-pocket costs, but they don’t include long-term care, which can easily double the total if you need it.
That single number, while useful as a benchmark, doesn’t tell you much about what you’ll actually pay year to year or where the money goes. Breaking it down makes retirement health care costs feel less like a mystery and more like something you can plan around.
What Medicare Costs You Every Month
Medicare isn’t free. Most retirees pay a monthly premium for Part B (which covers doctor visits, outpatient care, and lab work) and a separate premium for Part D (prescription drug coverage). In 2025, the standard Part B premium is $185 per month, or $2,220 per year. Part B also carries an annual deductible of $257 before coverage kicks in.
Part D premiums vary by plan, but the average sits around $40 to $50 per month. Together, a typical retiree pays somewhere between $2,700 and $3,000 a year just in Medicare premiums before filling a single prescription or seeing a doctor. Over 20 years of retirement, premiums alone account for a significant chunk of that $172,500 lifetime estimate.
One important change starting in 2025: the Inflation Reduction Act caps annual out-of-pocket spending on Part D prescription drugs at $2,000. Before this cap, retirees with expensive medications could face costs many times higher. If you take costly drugs for chronic conditions, this is a meaningful protection.
Higher Earners Pay More
If your income in retirement is above certain thresholds, Medicare adds surcharges to both your Part B and Part D premiums through a system called IRMAA (Income-Related Monthly Adjustment Amount). These surcharges are based on your tax return from two years prior.
For individuals filing solo, the surcharges begin when income exceeds $109,000. For married couples filing jointly, the threshold is $218,000. Above those levels, Part B premiums climb in stages. At the first tier, you’d pay roughly $284 per month instead of the standard $185, and Part D adds about $14.50 on top of your plan premium. The surcharges increase at each income bracket and can more than triple the standard premium at the highest levels. If you’re planning large Roth conversions or selling property in retirement, keep in mind that the resulting income spike can trigger higher Medicare premiums two years later.
Filling the Gaps: Medigap and Medicare Advantage
Original Medicare (Parts A and B) still leaves you responsible for copays, coinsurance, and deductibles that can add up quickly during a hospital stay or a series of specialist visits. Most retirees choose one of two routes to manage that exposure.
Medigap (Supplement Plans)
Medigap policies cover most or all of the costs that Original Medicare doesn’t. Plan G is the most popular option available to new enrollees and covers nearly everything except the Part B deductible. The average monthly premium for Plan G is $164, though it ranges from about $140 in lower-cost states to $236 in New York. That’s an additional $1,968 to $2,832 per year on top of your Medicare premiums. The tradeoff is predictability: with Medigap, you rarely face surprise bills.
Medicare Advantage
Medicare Advantage plans (Part C) bundle hospital, medical, and often drug coverage into a single plan, frequently with $0 monthly premiums beyond your Part B payment. Many include dental, vision, and hearing benefits that Original Medicare lacks. The catch is network restrictions and prior authorization requirements. You’ll generally need referrals for specialists, and coverage for out-of-network care is limited.
In 2024, the average in-network out-of-pocket maximum for Medicare Advantage enrollees is $4,882. HMO-style plans tend to be lower, averaging around $3,965. These caps protect you in a bad year, but in a healthy year you may pay very little. The variability is higher than with Medigap, where your costs are essentially flat regardless of how much care you use.
The Wild Card: Long-Term Care
Fidelity’s $172,500 estimate explicitly excludes long-term care, and that’s where costs can become staggering. Medicare does not cover extended stays in assisted living facilities or nursing homes. If you need this level of care, you’re paying out of pocket, through long-term care insurance, or eventually qualifying for Medicaid after spending down your assets.
The national median cost for an assisted living facility is $5,900 per month, or about $70,800 per year. A private room in a nursing home runs $350 per day, which works out to roughly $127,750 per year. The average nursing home stay is about two and a half years, meaning a private room could cost north of $300,000.
These numbers vary enormously by region. A nursing home in rural Mississippi costs far less than one in suburban Connecticut. But the core reality is the same everywhere: a few years of long-term care can exceed what you’d spend on all other health care in retirement combined. About half of people turning 65 today will need some form of long-term care, so this isn’t an edge case to brush off.
Where Your Money Actually Goes Year by Year
In the early years of retirement, health care spending tends to be relatively modest. You’re paying premiums, filling prescriptions, and seeing doctors for routine care. A healthy 65-year-old couple might spend $8,000 to $12,000 a year depending on their coverage choices and medication needs.
Costs accelerate later. By your mid-70s and into your 80s, you’re more likely to manage multiple chronic conditions, need more frequent specialist visits, and face hospitalizations. Dental work, hearing aids, and vision care (which Original Medicare largely doesn’t cover) add up over time. And if cognitive decline or mobility issues develop, the costs shift from medical care to custodial care, which is where the long-term care figures come in.
Health care inflation also plays a role. Medical costs have historically risen faster than general inflation, meaning the premiums and out-of-pocket costs you pay at 80 will likely be substantially higher in raw dollars than what you paid at 65, even for the same services.
Strategies That Reduce the Burden
A Health Savings Account is one of the most powerful tools available if you’re still working and enrolled in a high-deductible health plan. In 2025, you can contribute up to $4,300 for individual coverage or $8,550 for family coverage. If you’re 55 or older, you can add an extra $1,000 per year. HSA contributions are tax-deductible, grow tax-free, and can be withdrawn tax-free for qualified medical expenses at any age. Unlike a flexible spending account, HSA funds never expire. Many financial planners recommend maxing out HSA contributions in the years before retirement and letting the balance grow as a dedicated health care fund.
Beyond savings vehicles, your coverage decisions make a real difference. Choosing between Medigap and Medicare Advantage is the biggest lever most retirees have. If you’re generally healthy and comfortable with network restrictions, Medicare Advantage can keep annual costs low. If you want full freedom to see any provider and prefer predictable expenses, Medigap plus a standalone Part D plan gives you that, at a higher fixed cost.
Where you retire matters too. Fidelity’s estimate is a national average, but health care costs, insurance premiums, and long-term care prices vary significantly by state. Moving from a high-cost area to a lower-cost one can meaningfully reduce what you spend over a 20- or 30-year retirement. Even within the same state, premiums for the same Medigap plan can differ by 30% or more depending on the county.
Planning for long-term care deserves its own line in your retirement budget. Long-term care insurance is one option, though premiums have risen sharply and the industry has consolidated. Hybrid life insurance policies that include long-term care riders have become more common. Some retirees simply earmark a portion of their savings specifically for this risk. The right approach depends on your health, family history, and how much financial cushion you have, but ignoring the possibility is the most expensive strategy of all.