Strategies for a successful retirement

Many Americans underestimate the health-care expenses they will face after retiring, even if they qualify for Medicare. According to a March 2026 analysis by the Employee Benefit Research Institute (EBRI), a 65-year-old couple may need approximately $405,000 in savings to have a 90% chance of covering health-care costs throughout retirement. This figure accounts for premiums, deductibles, coinsurance, and prescription drugs under typical Medicare coverage choices.

In scenarios with especially high prescription drug spending, the required savings can climb to $469,000. These estimates reflect the reality that costs tend to rise with age as medical needs increase. Experts note that unexpected major health events later in retirement often catch retirees off guard financially.

What Medicare Covers — and What It Doesn’t

Medicare provides essential health coverage for people 65 and older, but it does not eliminate all expenses. The program includes several parts:

Many beneficiaries add supplemental coverage. Medigap (Medicare Supplement Insurance) fills gaps in traditional Medicare but comes with its own premiums. Medicare Advantage plans, offered by private insurers, often feature lower monthly premiums and may include extra benefits, but they typically involve networks of providers, copays, coinsurance, and out-of-pocket maximums.

Even with these options, retirees usually pay 20% coinsurance for many services under traditional Medicare, which has no annual out-of-pocket cap. Additional coverage for prescriptions or supplements can add $100 to $300 or more per month, depending on the plan selected.

Beyond Medicare, retirees face other expenses that the program does not fully cover, such as dental, vision, hearing aids, and long-term care. On average, Medicare beneficiaries spend about $6,330 per year on health care, including premiums and uncovered services, according to data from the Kaiser Family Foundation.

Savings Needed: Traditional Medicare vs. Medicare Advantage

EBRI’s projections use simulations that factor in different lifespans, investment returns, and health-care usage patterns. Here’s how the numbers break down for couples at age 65:

Traditional Medicare with Medigap:

Medicare Advantage:

While Medicare Advantage plans often show lower required savings on paper, they come with important trade-offs. These plans usually restrict provider networks, and switching back to traditional Medicare plus Medigap later in life may require medical underwriting, potentially making coverage more expensive or difficult to obtain.

Strategies for Planning Health-Care Costs in Retirement

Financial planners emphasize that successful retirement planning requires looking beyond monthly premiums. Out-of-pocket costs often spike later in life when health needs intensify and options for changing coverage become limited.

Carolyn McClanahan, a physician and certified financial planner, recommends building an annual cushion of $5,000 to $15,000 for unexpected medical expenses, with unused amounts carried over. She notes that health-care spending tends to come in waves rather than steady amounts.

Jim Shagawat, another certified financial planner, suggests keeping one to two years of projected health-care costs in stable, liquid assets as a buffer. After a high-cost year, the reserve can be gradually replenished through portfolio rebalancing or by directing dividends and interest into cash holdings. Another effective approach is to set aside a consistent amount each year, allowing unused funds to accumulate for larger future expenses.

The goal, planners agree, is not to predict every dollar precisely but to ensure that health-care costs do not derail the overall retirement plan. Starting early, understanding your specific Medicare options, and regularly reviewing your assumptions can help retirees stay prepared as they age.

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