How to prepare for healthcare costs in retirement

March 18, 2022

Even if you’re in excellent health as you near retirement, it’s likely your healthcare costs will rise as you age. The good news is you can plan your healthcare savings. 


While life expectancies are increasing, people may underestimate how long they’ll live and, accordingly, how much they’ll need to budget for healthcare. Additionally, it could be one of your largest expenses as you get older. Are you prepared to deal with these costs in retirement?

Answer these questions to gauge where you’re at, and then get some tips to help you feel more prepared.


Understand your Medicare options

1.   At what age do most people first become eligible to enroll in Medicare?

A.   59-1/2

B.   62

C.   65

D.  70

Answer: C. 65. You’re eligible to enroll in Medicare in a seventh-month window: three months before your 65th birthday, your birthday month, and three months after your 65th birthday. If you’re still working, you have the option to enroll when you turn 65 and another eight-month enrollment window after you stop working.


2.   Which of these statements accurately reflects the costs of Medicare?

A.   There are costs to participate in Part A of Medicare coverage for most people

B.   Most forms of Medicare coverage will require you to pay a premium and face out-of-pocket expenses

C.   You can delay Medicare for as long as you like with no penalty

D.  Medicare is free, and you won’t have any healthcare expenses in retirement

Answer: B. Most forms of Medicare coverage will require you to pay a premium and face out-of-pocket expenses. Medicare helps make health insurance coverage more affordable in retirement. But only the most basic form of Medicare (Part A, referred to as “hospital” insurance) is free for most. Additional forms of Medicare for covering doctor visits, clinic services, prescription drugs and surgical procedures require premiums. And you’ll still face out-of-pocket expenses.

Read more about your Medicare coverage options.


Set up an HSA now for healthcare costs in retirement

3.   If you’ve accumulated money in a Health Savings Account (HSA), in which of the following ways can that money be spent in retirement without incurring taxes on withdrawals?

A.   Purchasing prescription drugs

B.   Paying Medicare premiums

C.   Covering deductibles and co-pays

D.  All of the above

Answer: D. All of the above. Health Savings Accounts (HSAs) offer a way to accumulate targeted savings in a tax-advantaged way while you’re still working. While you can no longer make contributions to an HSA once you enroll in Medicare, you can continue to use the funds to cover insurance premiums and other out-of-pocket expenses.

Read more about how you can use an HSA in retirement.


Consider the possibility of long-term care

4.   Which of the following can help offset the costs of long-term care services, such as in-home or nursing home care?

A.   Medicare

B.   A Medicare Supplement policy

C.   Long-term care insurance

D.  A Medicare Advantage policy

Answer: C. Long-term care insurance. Almost 70% of Americans turning age 65 will require long-term care services and support at some point in their lives.3 If you should need specialized care later in life, either in-home or in an assisted living or nursing facility, Medicare offers limited support. Consider the benefits of having long-term care insurance (LTCI) in place to help you prepare for what could be debilitating costs during your retirement.

LTCI can be purchased as standalone policies or as a component of certain life insurance policies. Consider meeting with a financial professional now to review these LTCI options. The younger you are, the more affordable these policies are to fund long term care. 

Get more details about long-term care insurance.


Incorporate healthcare savings into your financial plan

5. How much can the average 65-year-old couple retiring now expect to pay in healthcare costs during retirement, not including long-term care?

A.   $380,000

B.   $240,000

C.   $150,000

D.  $500,000+

Answer: A. $380,000.1 Medical costs have been growing at a faster rate than the broader measure of inflation.2 This means costs of health insurance coverage and other medical-related expenses are likely to increase significantly over the course of retirement. Given the reality that you’re likely to face increasing medical issues as you grow older, there’s little doubt that healthcare will be a major expense category in retirement.

Consider working with a financial professional to create a comprehensive health profile. Factor in a realistic estimate of your longevity and healthcare costs in retirement, including vision exams, dental work, prescription drugs, medical equipment and potential long-term care. You’ll then have the basis for a realistic cost estimate — and a concrete dollar goal.


Read our retirement planning checklist to review other key issues to address on your way to retirement.

Related content

3 steps to prepare for a medical emergency

Bank from home with these digital features

How to increase your savings

4 tips to help you save for retirement in your 20s

Helpful tips for safe and smart charitable giving

LGBTQ+ retirement planning: What you need to know

Money Moments: 8 dos and don’ts for saving money in your 30s

5 unexpected retirement expenses

A guide to tax diversification and investing

How to retire happy

Should rising interest rates change your financial priorities?

Tips to raise financially healthy kids at every age

Do your investments match your financial goals?

Working after retirement: Factors to consider

6 pandemic money habits to keep for the long term

Year-end financial checklist

Key milestone ages as you near and start retirement

What financial advice would you give your younger self?

How to discuss money with your family

Comparing term vs. permanent life insurance

7 ways for pre-retirees to get ready for retirement

Travel for less: Smart (not cheap) ways to spend less on your next trip

What kind of life insurance is right for me?

5 things to consider when deciding to take an unplanned trip

Your financial aid guide: What are your options?

How having savings gives you peace of mind

Starting your homebuying journey: Tips from a U.S. Bank Goals Coach

8 steps to choosing a health insurance plan

What’s in your emergency fund?

Make your business legit

Retirement income planning: 4 steps to take

Reviewing your beneficiaries: A 5-step guide

9 simple ways to save

Retirement expectations quiz

3 types of insurance you shouldn’t ignore

Checking and savings smarts: Make your accounts work harder for you

Annual insurance review checklist

5 financial goals for the new year

Allowance basics for parents and kids

How to manage your money: 6 steps to take

6 common financial mistakes made by dentists (and how to avoid them)

IRA vs. 401(k): What's the difference?

A who’s who at your local bank

Finding a side gig to fund your goals

Working with an accountability partner can help you reach your goals

First-timer’s guide to savings account alternatives

Commonly asked questions about receiving Social Security benefits

The connection between your health and financial well-being

How to build wealth at any age

3 tips for saving money easily

Retirement planning in the gig economy

Retirement quiz: How ready are you?

How to use your unexpected windfall to reach financial goals

Money management guide to financial independence

5 myths about emergency funds

Home buying myths: Realities of owning a home

Certificates of deposit: How they work to grow your money

What military service taught me about money management

What is Medicare? Understanding your coverage options

5 steps to take before transitioning your business

7 beneficiary designation mistakes to avoid

Rebuilding finances after a natural disaster

Tips for working in the gig economy

Common unexpected expenses and three ways to pay for them

How to best handle unexpected expenses

Dear Money Mentor: How do I pick a savings or checking account?

Webinar: Smart habits and behaviors to achieve financial wellness

Practical money tips we've learned from our dads

Myths vs. facts about savings account interest rates

Saving vs. investing: What's the difference?

Key components of a financial plan

7 things to know about long-term care insurance

Retirement planning strategies for dual-income families

What I learned from my mom about money

How compound interest works

Your 4-step guide to financial planning

4 financial considerations before changing jobs

Standardizing healthcare payments

6 common money mistakes to avoid

Here’s how to create a budget for yourself

Understanding guardianship and power of attorney in banking

Consolidating payments for healthcare systems

How to prepare for healthcare costs in retirement

How much life insurance do I need?

Is a Health Savings Account missing from your retirement plan?

Is your employer long term disability insurance enough?

Financial steps to take after the death of a spouse

How to decide when to shop local and when to shop online

How COVID-19 is transforming healthcare payments

How I did it: Bought a home without a 20 percent down payment

The lowdown on 6 myths about buying a home

Growing your savings by going on a ‘money hunt’

Multiple accounts can make it easier to follow a monthly budget

You can take these 18 budgeting tips straight to the bank

Are savings bonds still a thing?

How I did it: Learned to budget as a single mom

What is an escrow account? Do I have one?

Which is better: Combining bank accounts before marriage — or after?

Does your savings plan match your lifestyle?

Do you and your fiancé have compatible financial goals?

How to cut mindless spending: real tips from real people

Webinar: 5 myths about emergency funds

7 steps: How couples and single parents can prepare for child care costs

Adulting 101: How to make a budget plan

5 tips for parents opening a bank account for kids

How to manage money in the military: A veteran weighs in

How to save for a wedding

It's possible: 7 tips for breaking the spending cycle

Money Moments: 3 smart financial strategies when caring for aging parents

Tips to overcome three common savings hurdles

Webinar: Uncover the cost: Wedding

Webinar: Uncover the cost: International trip

Building a financial legacy for your family and community

5 ways to spring clean your finances and save money year-round

Saving for a down payment: Where should I keep my money?

Beyond the mortgage: Other costs for homeowners

How to Adult: 5 ways to track your spending

Tips for navigating a medical hardship when you’re unable to work

How to plan and save for adoption and in vitro fertility treatment costs

Resources for managing financial matters after an unexpected death

What documents do you need after a loved one dies?

How to prepare for a natural disaster

College budgeting: When to save and splurge

How to save money in college: easy ways to spend less

Checklist: How to gain financial independence from your parents

5 things to know before accepting a first job offer

5 tips for seniors to stay a step ahead of schemers

Recognize. React. Report. Caregivers can help protect against financial exploitation

Identity stolen? 5 steps to take immediately

How you can prevent identity theft

Webinar: U.S. Bank asks: Are you safe from fraud?

How to apply for federal student aid through the FAFSA

Hospitals face cybersecurity risks in surprising new ways

Webinar: Mindset Matters: How to practice mindful spending

CancelSave & Close Planning self-care moments that matter (and how to finance them)

How to test new business ideas

Costs to consider when starting a business

How to expand your business: Does a new location make sense?

How to choose the right business savings account

Does your side business need a separate bank account?

How to improve your business network security

3 benefits of integrated payments in healthcare

Top 3 ways digital payments can transform the patient experience

1 Why Health Needs to be Part of Retirement Planning. HealthView Services, 2019.
2 Source: Federal Reserve Bank of St. Louis. Consumer Price Index for all Urban Consumers for All Item (U.S. City Average) was. 18.7% from Dec. 2010 through Dec. 2020. Consumer Price Index for All Urban Consumers for Medical Care (U.S. City Average) was 32.3% during the same period.
3 How Much Care Will You Need? U.S. Department of Health and Human Services.
Start of disclosure content

Investment and insurance products and services including annuities are:
Not a deposit ● Not FDIC insured ● May lose value ● Not bank guaranteed ● Not insured by any federal government agency.

U.S. Wealth Management – U.S. Bank | U.S. Bancorp Investments is the marketing logo for U.S. Bank and its affiliate U.S. Bancorp Investments.

The information provided represents the opinion of U.S. Bank and U.S. Bancorp Investments and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific investment advice and should not be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation.

U.S. Bank, U.S. Bancorp Investments and their representatives do not provide tax or legal advice. Each individual's tax and financial situation is unique. You should consult your tax and/or legal advisor for advice and information concerning your particular situation.

For U.S. Bank:

U.S. Bank does not offer insurance products but may refer you to an affiliated or third party insurance provider.

U.S. Bank is not responsible for and does not guarantee the products, services or performance of U.S. Bancorp Investments, Inc.

For U.S. Bancorp Investments:

Investment and insurance products and services including annuities are available through U.S. Bancorp Investments, the marketing name for U.S. Bancorp Investments, Inc., member FINRA and SIPC, an investment adviser and a brokerage subsidiary of U.S. Bancorp and affiliate of U.S. Bank.

U.S. Bancorp Investments is registered with the Securities and Exchange Commission as both a broker-dealer and an investment adviser. To understand how brokerage and investment advisory services and fees differ, the Client Relationship Summary and Regulation Best Interest Disclosure are available for you to review.

Insurance products are available through various affiliated non-bank insurance agencies, which are U.S. Bancorp subsidiaries. Products may not be available in all states. CA Insurance License #0E24641.

Pursuant to the Securities Exchange Act of 1934, U.S. Bancorp Investments must provide clients with certain financial information. The U.S. Bancorp Investments Statement of Financial Condition is available for you to review, print and download.

The Financial Industry Regulatory Authority (FINRA) Rule 2267 provides for BrokerCheck to allow investors to learn about the professional background, business practices, and conduct of FINRA member firms or their brokers. To request such information, contact FINRA toll-free at 1-800‐289‐9999 or via An investor brochure describing BrokerCheck is also available through FINRA.

U.S. Bancorp Investments Order Processing Information.