Ask almost any financial planner what retirees most frequently underestimate, and the answer is nearly always the same: healthcare costs. This isn’t because people don’t know healthcare is expensive — they do. It’s because the full picture of what healthcare actually costs in retirement, once you’re no longer covered by an employer’s group plan, is genuinely surprising to most people when they see it laid out clearly.

For retirees living on Florida’s Treasure Coast — in communities stretching from Stuart and Port St. Lucie up through Vero Beach — the considerations are both similar to and somewhat different from national averages. Florida has a large and experienced Medicare market, a significant number of retiree-focused healthcare providers, and no state income tax, which affects how you manage healthcare-related withdrawals. But Florida also has a higher-than-average cost of living in many coastal areas, and hurricane season can complicate everything from medication supplies to facility access.

This guide walks through every major dimension of healthcare costs in retirement: what Medicare actually covers (and what it doesn’t), how to plan for the gap years before Medicare eligibility, the role of supplemental coverage, long-term care, and how to build healthcare into a retirement budget in a realistic, sustainable way. Our goal is simple: that you finish reading this significantly more informed than when you started.

1. The Real Numbers: How Much Does Healthcare Cost in Retirement?

Fidelity Investments publishes an annual estimate of lifetime healthcare costs for retirees. Their most recent figures suggest that a 65-year-old couple retiring today may need approximately $315,000 to $350,000 in today’s dollars to cover healthcare expenses throughout retirement — and that figure does not include long-term care costs, which we’ll address separately.

That aggregate number can feel abstract. Breaking it into annual terms is more useful for budgeting purposes. A reasonable planning benchmark for a healthy 65-year-old enrolled in Medicare is somewhere between $6,000 and $12,000 per year in out-of-pocket healthcare expenses, depending on the coverage choices you make, your health status, and the medications you take. This range includes Medicare premiums, supplemental insurance premiums, dental, vision, hearing, and typical out-of-pocket costs.

Several factors push that number higher or lower:

• Prescription drug use: Retirees on multiple maintenance medications face substantially higher costs, particularly for specialty drugs not well-covered under standard Part D plans.
• Chronic conditions: Managing diabetes, heart disease, COPD, or other ongoing conditions adds consistent costs throughout retirement.
• Supplemental coverage choice: Whether you choose a Medicare Supplement (Medigap) plan or a Medicare Advantage plan dramatically affects your cost structure and predictability.
• Longevity: Healthcare costs tend to accelerate in the final years of life. A retirement that stretches to 90 or beyond will carry substantially higher cumulative costs than one ending at 75.

The key takeaway: healthcare is a significant, variable, and inflation-prone line item in any retirement budget. It deserves its own dedicated planning category — not just a line item folded into “general living expenses.”

2. Understanding Medicare: What It Covers and What It Doesn’t

Medicare becomes available at age 65, and for most retirees it becomes the foundation of their healthcare coverage. Understanding its structure is essential before you can plan around it intelligently.

The Four Parts of Medicare

• Part A (Hospital Insurance): Covers inpatient hospital stays, skilled nursing facility care (under specific conditions), hospice, and some home health services. Most people don’t pay a premium for Part A if they or their spouse worked and paid Medicare taxes for at least 10 years.
• Part B (Medical Insurance): Covers outpatient care, doctor visits, preventive services, and durable medical equipment. The standard 2024 Part B premium is approximately $174.70 per month, though higher earners pay more through IRMAA surcharges (explained below).
• Part C (Medicare Advantage): Private insurance plans that bundle Part A, Part B, and usually Part D. They often include additional benefits (dental, vision, gym memberships) but restrict you to a network and may require prior authorizations for certain services.
• Part D (Prescription Drug Coverage): Standalone drug coverage added to Original Medicare, or included within Medicare Advantage plans. Premiums, deductibles, and formularies vary widely by plan.

Critical Gaps in Medicare Coverage

Medicare does not cover everything, and several significant gaps catch retirees off guard:

• Dental care: Routine dental care, fillings, cleanings, and dentures are not covered by Original Medicare. Dental costs are among the most significant surprise expenses for retirees.
• Vision care: Routine eye exams and eyeglasses are not covered (though treatment for eye diseases like glaucoma or macular degeneration may be).
• Hearing aids: Not covered. Hearing aids can cost $3,000–$7,000+ per pair, and many retirees need them.
• Long-term care: Medicare does not cover custodial care — the ongoing assistance with daily activities in a nursing home or memory care facility. This is one of the most important financial planning considerations in retirement.
• Most care outside the U.S.: If you travel internationally or spend time outside the country, Medicare generally provides no coverage.

Understanding these gaps is the starting point for building a supplemental coverage strategy.

3. Medicare Supplement vs. Medicare Advantage: A Framework for Choosing

The most consequential healthcare coverage decision most retirees make is whether to pair Original Medicare with a Medigap (Medicare Supplement) plan or to replace it entirely with a Medicare Advantage plan. Both approaches have genuine merit; neither is universally superior.

Medicare Supplement (Medigap) Plans

Medigap plans are sold by private insurers and are designed to fill the cost-sharing gaps in Original Medicare — deductibles, coinsurance, and copayments. Plan G is currently the most comprehensive plan available to new enrollees (Plan F was discontinued for those newly eligible after 2020).

Advantages: Highly predictable costs, freedom to see any Medicare-accepting provider nationwide (important if you travel or split time between states), and no network restrictions or referral requirements. Tradeoffs: Higher monthly premiums, no coverage for dental/vision/hearing (you’ll need separate policies), and underwriting applies if you try to change plans later.

Medicare Advantage Plans

Medicare Advantage plans often have lower or even $0 monthly premiums and frequently include dental, vision, hearing, and other extras. On the Treasure Coast, several national and regional insurers offer competitive Advantage plans in Martin, St. Lucie, and Indian River counties.

Advantages: Lower premiums, bundled benefits, maximum out-of-pocket caps. Tradeoffs: Network restrictions, prior authorization requirements for some procedures, and the fact that your costs can be less predictable if you face a serious illness or hospitalization. Switching back to Original Medicare with a Medigap plan later can be difficult due to underwriting.

There is no universally correct answer. The right choice depends on your health history, financial situation, how much you value predictability vs. lower premiums, and whether you travel or see specialists frequently. This decision is worth careful analysis — ideally with a fee-only advisor or a licensed Medicare specialist who is not compensated based on which plan you choose.

4. The Pre-Medicare Gap: Bridging Ages 62–64

One of the most expensive and overlooked phases of retirement planning is the period between leaving employer coverage and reaching Medicare eligibility at 65. For someone who retires at 62 or 63, that’s two to three years of private health insurance — often at the highest cost period of your life.

Options for this coverage gap include:

• COBRA continuation coverage: Allows you to continue your employer’s group health plan for up to 18 months. You pay the full premium (employee + employer share) plus an administrative fee. This is often very expensive — sometimes $1,500–$2,500/month for a couple — but provides continuity of care with existing providers.
• ACA Marketplace plans: Available through healthcare.gov. A critical planning note for early retirees: if your income in retirement is low enough (generally below 400% of the federal poverty level, approximately $60,000 for a single person in 2024), you may qualify for premium tax credits that substantially reduce your cost. Income management in early retirement can meaningfully affect your insurance premiums.
• Spouse’s employer plan: If a spouse is still working and has employer coverage, joining their plan is often the most cost-effective option.
• Part-time work with benefits: Some retirees choose part-time work specifically to access employer-sponsored health coverage during this gap period.

Budget conservatively for this period. Pre-65 healthcare is consistently one of the largest surprises in early retirement cash flow planning, and costs have historically increased faster than general inflation.

5. IRMAA: The Hidden Medicare Surcharge High Earners Often Miss

IRMAA stands for Income-Related Monthly Adjustment Amount. It’s a Medicare premium surcharge that applies to retirees whose income exceeds certain thresholds. In 2024, if your Modified Adjusted Gross Income (MAGI) from two years prior exceeds $103,000 (single) or $206,000 (married filing jointly), you’ll pay more for Medicare Parts B and D.

The surcharges can be significant. At the highest income tier, a couple could pay over $700 per month in additional premiums above the standard rate — or roughly $8,400 per year. IRMAA surcharges apply at five income brackets, and because Medicare uses income from two years prior (called “look-back”), planning decisions made today affect your Medicare costs down the road.

This creates important planning considerations:

• Large Roth conversions, required minimum distributions (RMDs), and capital gains realizations can push income above IRMAA thresholds.
• You can appeal an IRMAA determination if your income dropped significantly due to a “life-changing event” such as retirement, divorce, or death of a spouse.
• Coordinating the timing of income — including Social Security filing age, IRA withdrawals, and asset sales — can sometimes help manage IRMAA exposure.

IRMAA is a good example of why healthcare cost planning and broader retirement income planning cannot be done in isolation from each other. The decisions interact.

6. Long-Term Care: The Largest Unplanned Healthcare Expense

Long-term care refers to ongoing assistance with the activities of daily living — bathing, dressing, eating, mobility — whether provided in a nursing home, assisted living facility, memory care unit, or at home. The U.S. Department of Health and Human Services estimates that approximately 70% of people who reach age 65 will need some form of long-term care during their lifetime.

The costs are substantial. On Florida’s Treasure Coast, a private room in a nursing home typically runs $8,000–$12,000 per month. Assisted living ranges widely, from roughly $3,500–$6,500/month for a basic unit to considerably more for memory care or specialized services. Home health aide services typically run $25–$35/hour, and full-time home care can easily equal or exceed nursing home costs.

There are several approaches to managing long-term care risk, and the right one varies by financial situation:

• Traditional long-term care insurance: Pays a benefit if you need qualifying care. Premiums have risen significantly over the years, and fewer carriers offer these policies today, but they can provide meaningful protection.
• Hybrid life/LTC policies: Life insurance or annuity products with long-term care riders that provide a benefit whether you need care or die without using it. These have become increasingly popular because premiums are typically fixed and the policy doesn’t “expire worthless” if you don’t need care.
• Self-insuring: Retirees with substantial assets may choose to set aside funds dedicated to potential long-term care expenses rather than paying insurance premiums. This approach requires larger reserves and accepts concentration risk.
• Medicaid planning: Medicaid does cover long-term care for those who qualify financially, but eligibility requires spending down assets to low levels, and accessing quality facilities can be challenging. This is a last resort for most, not a primary strategy.

Long-term care planning deserves a dedicated conversation with a qualified advisor. It’s emotionally difficult to contemplate, but the financial consequences of having no plan — for both the individual and their family — can be severe.