The $172,500 Healthcare Bomb Waiting for You in Retirement
If you’re planning to retire in 2025, here’s a number you need to know: $172,500. That’s how much the average 65-year-old will spend on healthcare throughout retirement, according to Fidelity’s 2025 Retiree Health Care Cost Estimate.
LIFETIME HEALTHCARE COSTS IN RETIREMENT
$172,500
For average 65-year-old retiring in 2025
That’s up 4% from last year and represents more than double the $80,000 estimate from 2002. And here’s the kicker: this doesn’t even include long-term care costs, which could easily add another $100,000 or more.
What’s Covered—and What Isn’t
Before we dive into the numbers, let’s be clear about what that $172,500 covers:
What IS Included in Fidelity’s Estimate
- Medicare Part A premiums (hospital insurance)
- Medicare Part B premiums (medical insurance)
- Medicare Part D premiums (prescription drug coverage)
- Co-payments and deductibles
- Out-of-pocket costs for covered services
- Prescription drug costs
⚠️ What is NOT Included
- Long-term care: Nursing home, assisted living, home health aides
- Dental care: Routine cleanings, fillings, crowns, dentures
- Vision care: Eye exams, glasses, contact lenses
- Hearing aids: Devices and fittings
- Over-the-counter medications: Pain relievers, vitamins, supplements
- Medigap or Medicare Advantage premiums: Supplemental coverage
When you add up all the excluded costs, many retirees will actually spend closer to $250,000-$300,000 on healthcare throughout retirement.
Breaking Down Your Medicare Costs for 2025
| Medicare Component | 2025 Cost | What It Covers |
|---|---|---|
| Part A (Hospital) | $0 premium* | Inpatient hospital, skilled nursing, hospice |
| Part B (Medical) | $185/month | Doctor visits, outpatient care, preventive services |
| Part D (Drugs) | $39/month avg | Prescription medications |
| Part B Deductible | $240/year | Annual deductible before coverage starts |
| Part D Deductible | $590/year | Maximum drug deductible for standard coverage |
| Out-of-Pocket Max | $2,000/year | New 2025 limit for Part D drug costs |
| TOTAL Monthly (Basic) | $224/month | $2,688 per year minimum |
*Free if you or your spouse paid Medicare taxes for 40+ quarters (10 years). Source: Medicare.gov 2025
The Hidden Cost: Income-Related Monthly Adjustment Amount (IRMAA)
Here’s something many retirees don’t know: if your income is above certain thresholds, you’ll pay MORE for Medicare Parts B and D. This is called IRMAA, and it can add thousands to your annual healthcare costs.
| 2025 Income (Individual) | 2025 Income (Married) | Part B Monthly | Part D Extra |
|---|---|---|---|
| ≤ $106,000 | ≤ $212,000 | $185 | $0 |
| $106,001-$133,000 | $212,001-$266,000 | $259 | $13.70 |
| $133,001-$167,000 | $266,001-$334,000 | $333 | $35.30 |
| $167,001-$200,000 | $334,001-$400,000 | $407 | $56.90 |
| $200,001-$500,000 | $400,001-$750,000 | $481 | $78.60 |
| > $500,000 | > $750,000 | $555 | $86.10 |
Income is based on tax return from 2 years prior. Source: Medicare.gov 2025
💡 CRITICAL NOTE: IRMAA is based on your income from two years ago. So your 2025 Medicare premiums are based on your 2023 tax return. Large IRA withdrawals or Roth conversions can trigger IRMAA surcharges two years later.
The Alarming Reality: Most Americans Aren’t Planning for Healthcare Costs
Despite these significant costs, Fidelity’s research reveals a disturbing lack of preparation:
- 1 in 5 Americans (20%) have never thought about healthcare needs during retirement
- 1 in 4 Gen Xers (25%) have never considered healthcare costs
- 17% of all generations have taken NO action to plan for healthcare expenses
AMERICANS WITH NO HEALTHCARE RETIREMENT PLAN
17%
That’s 1 in 6 future retirees
How Healthcare Costs Have Exploded Since 2002
| Year | Estimated Lifetime Cost | % Increase |
|---|---|---|
| 2002 | $80,000 | — |
| 2010 | $120,000 | +50% |
| 2015 | $138,000 | +72% |
| 2020 | $150,000 | +88% |
| 2024 | $165,000 | +106% |
| 2025 | $172,500 | +116% |
Source: Fidelity Investments Retiree Health Care Cost Estimates 2002-2025
That’s a 116% increase in just 23 years—far outpacing general inflation.
Your Action Plan: How to Prepare for Healthcare Costs in Retirement
10 Steps to Healthcare Cost Preparedness
Years Before Retirement (Ages 50-64):
- Maximize Health Savings Account (HSA) Contributions
- 2025 limits: $4,300 (individual), $8,550 (family), +$1,000 (age 55+)
- Triple tax advantage: deductible, grows tax-free, tax-free withdrawals for medical
- Can be invested and carried into retirement
- Calculate Your Healthcare Number
- Use $172,500 as baseline for couple
- Add 20% for inflation buffer: ~$207,000
- Add long-term care estimate: +$100,000-$150,000
- Total target: $300,000-$350,000 for healthcare alone
- Consider Long-Term Care Insurance
- Best purchased in your 50s when premiums are lower
- Average annual premium: $2,100-$3,600 (age 55)
- Can save $100,000+ in long-term care costs
- Stay Healthy Now
- Preventive care reduces long-term costs
- Address chronic conditions before Medicare enrollment
- Dental work: complete before retirement if possible
At Age 65 (Medicare Enrollment):
- Enroll on Time
- Sign up during initial enrollment period (3 months before, month of, 3 months after 65th birthday)
- Late enrollment = lifetime penalties
- Part B penalty: 10% per year late, permanent
- Part D penalty: 1% per month late, permanent
- Choose the Right Coverage
- Original Medicare + Medigap: More flexibility, higher premiums
- Medicare Advantage: Lower premiums, network restrictions
- Compare plans annually during open enrollment (Oct 15 – Dec 7)
- Review Prescription Drug Coverage
- Ensure your medications are covered
- Check formulary (list of covered drugs)
- Consider mail-order for maintenance medications
- New 2025 benefit: $2,000 out-of-pocket maximum
During Retirement:
- Budget $7,000-$10,000 Annually for Healthcare
- Premiums: ~$2,700-$3,600
- Out-of-pocket: ~$2,000-$3,000
- Dental/vision: ~$1,500-$2,000
- Prescriptions: ~$800-$1,400
- Manage IRMAA Triggers
- Be strategic with large IRA withdrawals
- Spread Roth conversions over multiple years
- Time capital gains carefully
- File appeal if income drops (job loss, death of spouse)
- Review Coverage Annually
- Medicare plans change every year
- Your health needs change
- New drugs may be added or removed from formularies
- Premiums and coverage change annually
The Bottom Line
Healthcare will likely be your second-largest expense in retirement (after housing). The $172,500 average cost is not a suggestion—it’s a reality that you must plan for.
Remember: Every dollar you don’t save for healthcare is a dollar you’ll have to pull from your retirement savings or lifestyle budget. Start planning NOW, regardless of your age.
Have you calculated your healthcare costs for retirement? What’s your strategy for covering the $172,500+ you’ll need? Share your plan in the comments below.
About the Author: Robert Chen is a Retirement Finance Analyst at RetireMetric.com, specializing in healthcare cost planning and Medicare strategy for retirees.
Leave a Reply