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Retirement is often pictured as a time of freedom, relaxation, and well-earned enjoyment. You’ve worked for decades, saved diligently, and now it’s time to live life on your terms. But there’s one factor that can quietly erode even the most well-built retirement plan: the rising cost of healthcare and the reality of living longer than ever before.
According to Fidelity Investments, a 65-year-old retiring today can expect to spend an average of $172,500 on healthcare and medical expenses during retirement—a figure that has risen more than 4% in the last year alone [1]. This doesn’t even include long-term care, dental needs, or unexpected medical events.
As life expectancy increases, retirees are spending more years in retirement than past generations. A longer life is a wonderful gift, but it also means more years of medical costs, potential long-term care needs, and inflation that can drive those costs even higher. Many retirees feel financially ready to stop working but underestimate how much of their retirement income may be needed to maintain their health and independence.
This article explores the “silent risks” of healthcare and longevity, what many retirees overlook, and how to plan thoughtfully for the true cost of a long and healthy retirement.
Why Healthcare and Longevity Are Silent Risks in Retirement
Healthcare is one of the few expenses that tends to rise with age rather than fall. Even with Medicare, retirees often face premiums, copays, prescriptions, and medical procedures that aren’t fully covered. And as people live longer, those costs compound over time.
The Financial Planning Association (FPA) found that while more than half of financial planners believe their clients are financially prepared for retirement, only about 11% believe their clients are emotionally prepared for the realities of retirement—especially the worry of rising healthcare expenses, running out of money, and the possibility of long-term care needs [2].
Part of the challenge is that these costs can feel abstract when planning years in advance. But the numbers tell a clear story:
• Healthcare expenses are outpacing general inflation, meaning costs rise faster than most portfolios grow in the short term.
• The average healthy couple retiring at 65 could spend $300,000 or more on medical expenses over their lifetime.
• About 70% of people over 65 will need some type of long-term care during their lifetime, whether in-home help or a facility setting [3].
These costs are not only significant but also unpredictable, which makes planning for them essential.
What Retirees Often Underestimate
1. The Length of Retirement
A 65-year-old today could reasonably expect to live into their mid-80s—or longer. Many financial plans still assume a retirement lasting 20 years, but it’s increasingly common for people to live 25 or even 30 years past retirement. That extra decade can dramatically increase the total amount needed for healthcare and living expenses.
2. Out-of-Pocket Health Costs
Medicare is a critical foundation, but it doesn’t cover everything. Retirees are responsible for premiums, deductibles, prescription drug costs, dental care, vision, and hearing—expenses that can easily total thousands of dollars each year.
Inflation compounds the problem. Hypothetically, if healthcare costs rise by 5% annually, a retiree who spends $6,000 per year on medical care at age 65 could be paying over $12,000 annually by their late 80s.
3. Long-Term Care
Few expenses have the potential to derail a retirement plan like long-term care. A private room in a nursing facility now averages over $100,000 per year nationally, while in-home care averages around $60,000 depending on location. Since Medicare provides very limited coverage for this type of care, retirees often must rely on personal savings, long-term care insurance, or Medicaid eligibility later in life.
4. Inflation and Changing Health Needs
Medical inflation tends to run higher than the general cost of living. This means that even if your current budget feels adequate, your future healthcare costs could be substantially higher. Additionally, chronic conditions such as diabetes, arthritis, and cardiovascular disease can develop later in life, increasing medication and care needs.
How to Plan for Health and Longevity Costs
Planning for healthcare in retirement doesn’t mean predicting every future medical bill—it means preparing for the likelihood of rising expenses and building flexibility into your financial plan. Here are several strategies to consider:
1. Use Health Savings Accounts (HSAs) While Working
If you’re eligible, an HSA can be one of the most tax-efficient ways to prepare for future healthcare costs. Contributions are pre-tax, earnings grow tax-deferred, and withdrawals for qualified medical expenses are tax-free. Those who can afford to pay out-of-pocket for medical expenses now might consider allowing their HSA funds to grow and use them later in retirement when costs are typically higher.
2. Evaluate Long-Term Care Options Early
The earlier you consider long-term care coverage, the more affordable it can be. Policies vary widely, from traditional long-term care insurance to hybrid life and LTC products that offer flexibility if care is never needed. Discussing these options in your 50s or early 60s can help lock in lower premiums and broader coverage choices.
3. Coordinate Healthcare Costs with Your Withdrawal Strategy
When creating a retirement income plan, consider how and when you will draw from different accounts to pay for healthcare. For example:
• You might plan to use tax-free withdrawals from a Roth IRA or HSA for medical expenses.
• You could reserve a portion of conservative investments or cash for anticipated out-of-pocket costs.
• You may choose to delay Social Security benefits to increase guaranteed income later, which could help offset future medical expenses.
4. Incorporate Longevity Projections
Planning for a 25- to 30-year retirement horizon can help ensure that your assets are not depleted too early. Running “what-if” scenarios—such as living to 95 or experiencing a multi-year long-term care need—can help identify gaps before they become urgent.
5. Revisit Your Plan Regularly
Healthcare costs, tax laws, and personal health circumstances change. Reviewing your financial plan annually allows you to adjust assumptions, add inflation buffers, and stay aligned with your goals.
A Practical Retirement Health Cost Checklist
Here’s a simple way to get started preparing for healthcare and longevity risks:
1. Estimate future healthcare expenses. Use retirement calculators or work with an advisor to project annual costs adjusted for inflation.
2. Review your insurance coverage. Make sure you understand what Medicare covers, what it doesn’t, and whether a Medigap or Advantage plan fits your needs.
3. Plan for long-term care. Explore insurance, hybrid policies, or self-funding strategies.
4. Consider funding tax-efficient accounts. If eligible, contribute to an HSA. Consider tax diversification between Roth, traditional, and taxable accounts.
5. Stress-test your retirement plan. Test scenarios that include higher-than-expected healthcare costs or longer life expectancy.
6. Maintain healthy habits. While you can’t control every medical cost, a proactive lifestyle—regular exercise, preventive care, and stress management—can help reduce future expenses.
The Emotional Side of Planning for Longevity
Financial planning is about numbers, but retirement is about life. The FPA study found that most retirees underestimate not just financial costs but the emotional side of retirement. Longer life expectancy means more transitions—potentially caring for a spouse, adapting to health changes, or navigating multiple decades without employment income [2].
Facing these topics early, rather than avoiding them, can reduce stress and give you a sense of control. Building a plan that accounts for healthcare and longevity is not about expecting the worst—it’s about preparing to live well no matter what the future brings.
Key Takeaways
• Healthcare costs in retirement are substantial and rising faster than overall inflation.
• Longevity risk—the chance of outliving your money—is closely tied to rising healthcare and long-term care expenses.
• Using tools such as HSAs, long-term care planning, and flexible withdrawal strategies can help manage uncertainty.
• Reviewing and updating your plan annually keeps your retirement on track as your health, family, and financial picture evolve.
Final Thought
Retirement success isn’t just about how much you’ve saved, it’s about how well your plan adapts to life’s realities. Considering healthcare and longevity early can help protect your income, preserve your independence, and provide peace of mind.
If you haven’t yet factored these costs into your retirement strategy, consider meeting with a financial professional who can help you review healthcare scenarios and align your plan with your goals. A proactive approach today can make all the difference in maintaining financial confidence tomorrow.
Sources
1. Fidelity Investments, “2025 Retiree Health Care Cost Estimate,” Fidelity Newsroom, May 2025.
2. Financial Planning Association, “Trends in Retirement Research 2025,” FPA Press Release, April 2025.
3. UMA Technology, “Risks of Retirement Planning in 2025,” UMA Technology Report, June 2025.
Disclosures:
Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. Investing involves risk which includes potential loss of principal. The use of asset allocation or diversification does not assure a profit or guarantee against a loss.
All numeric examples and any individuals shown are hypothetical and were used for explanatory purposes only. Actual results may vary.
Not affiliated with or endorsed by the Social Security Administration, the Centers for Medicare & Medicaid Services, or any governmental agency.
