If you’re between age 60 and 64, you’re close enough to Medicare that health-care planning, including the choices and costs, belongs near the top of your retirement checklist. Even people who have saved well often underestimate how fast premiums, prescriptions and out-of-pocket costs add up.
Here’s a figure that usually grabs attention: The Employee Benefit Research Institute (EBRI) estimates that a 65-year-old couple enrolled in original Medicare with a Medigap plan and average premiums would want about $366,000 saved to have a 90% chance of covering retirement medical expenses tied to premiums, cost-sharing and prescription drugs over their lifetimes. For couples with particularly high prescription-drug costs, that 90% target increases to roughly $428,000.
Those figures do not include long-term care, which is a separate planning category and worth addressing on its own.
What Medicare Covers (and Where the Gaps Show Up)
Medicare is a strong foundation, but it’s not “free health care.”
- Part A (hospital) and Part B (outpatient/doctor services) come with deductibles and coinsurance, and Part B has a monthly premium. One more wrinkle: If your income is above certain thresholds, Part B — and often Part D — premiums can increase due to the Income-Related Monthly Adjustment Amount (IRMAA).
- Part D (prescription drugs) costs vary by plan and medication needs, and drug costs are often one of the biggest factors that changes from one household to the next.
- Dental, vision and hearing coverage are usually limited under original Medicare, so many retirees set aside separate funds for them.
Supplemental Insurance Options: The Two Main Lanes
Most retirees choose one of two broad approaches:
- Original Medicare + Part D + Medigap. Typically higher but more predictable premiums, and often fewer surprise bills.
- Medicare Advantage (Part C). Usually lower premiums, but plan networks, prior authorizations and out-of-pocket costs vary greatly.
There’s no universal “best” option. The right fit depends on your priorities — provider flexibility, travel, predictable costs and how much plan management you want to deal with.
Action Steps to Prepare Now
1) Build an ‘all in’ annual health-care estimate.
Don’t stop at “Medicare premium.” Include:
- Part B (and Part D, if applicable) premiums
- Deductibles/copays/coinsurance
- Prescription costs
- Dental/vision/hearing expenses
- Potential IRMAA surcharges (higher Part B — and often Part D — premiums if income is above certain thresholds)
Then compare your estimate to a benchmark like EBRI’s savings targets to see if you’re in the right range.
2) Treat age 65 as a planning milestone. Enrollment timing matters, and your choices can affect costs and flexibility. Start gathering information early, so decisions aren’t rushed.
3) Plan around prescription risk. Prescription spending is one of the reasons EBRI’s “high drug costs” scenario jumps meaningfully. If you have chronic conditions or expensive medications, build extra margin into your plan.
4) Create a dedicated ‘health-care bucket.‘ Many retirees do better when health-care dollars are clearly set aside — either in a separate savings account, a conservative investment fund or another dedicated pool — so the money doesn’t quietly compete with lifestyle spending.
5) Pressure-test your retirement-income plan. Run your plan assuming health-care costs come in higher than expected for a few years. If the plan still holds up, you’ll feel more confident about everything else.
Where a CFP® Professional Fits In
Health-care planning sits at the intersection of cash flow, taxes and risk management. A CFP® professional can help you estimate realistic all-in costs, compare Medicare paths based on your priorities and build health-care funding into your retirement strategy — whether that’s through health savings accounts (HSAs) if eligible, dedicated investment accounts or other coordinated approaches.
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