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July 3, 2026 • 10 minutes
A single retirement healthcare budget line hides more than it reveals. Costs before Medicare, during Medicare, and long-term care after that all follow their own rules. Each one shows up on a different schedule and can catch you off guard. Treat them as one blurry number and you’ll likely underbudget for at least one of them.
This matters whether you’re retiring at 62, right on schedule at 65, or well past it. The mistakes people make are about which piece gets forgotten, not the total dollar figure.
Most people think about healthcare in retirement as a single number to save toward. It works better as three phases, each with its own timeline and its own math: the years before Medicare if you retire early, the Medicare years, and long-term care later in life.
Fidelity’s 2026 estimate puts the Medicare-era phase at $185,500 for a single 65-year-old. That number is useful as a reference point, but it only covers one of the three phases. Think of it as the middle piece of a bigger plan, not the whole plan.
Here’s how the mistake usually plays out. Someone saves toward a single retirement healthcare number and assumes it covers whatever comes up. Then a bridge-year ACA premium arrives before Medicare even starts, or a parent’s nursing home stay shows up decades later, and neither one was part of the plan. The number wasn’t wrong. It just never claimed to cover those other two phases.
Medicare doesn’t start until 65. Retire earlier and you need to cover your own health insurance until then.
For someone retiring at 62, that’s three years to bridge. Full-price ACA coverage can run well over $1,000 a month depending on your state and plan tier. COBRA from a former employer typically costs even more, since you’re paying the full premium plus an admin fee. A spouse’s employer plan, when it’s available, is usually the cheapest of the three options.
How long you need to bridge depends entirely on when you stop working. Retire at 60 and you’re covering five years on your own. Retire at 64 and it’s a matter of months. Employer-sponsored retiree health plans used to soften this gap, but they’ve become rare outside a handful of industries, so most people are planning this phase from scratch instead of inheriting a benefit their employer still offers.
Leaving a job with group coverage also opens a narrow window. It counts as a qualifying life event, which gives you 60 days to enroll in an ACA marketplace plan without waiting for standard open enrollment. Missing that window can leave you without coverage until the next one opens, so it’s worth lining up before your last day of work rather than after.
Your income during these years matters more than most people expect. ACA subsidies are based on your modified adjusted gross income, and withdrawals from a traditional IRA or 401(k) count toward that number while Roth withdrawals generally don’t. Drawing from Roth savings first, where that’s an option, can keep your income under the subsidy threshold and lower what you pay each month.
At 65, healthcare costs change shape instead of stopping.
Part A handles hospital stays and is premium-free for most people; part B covers outpatient care and comes with a monthly premium plus coinsurance. Part D adds prescription drug coverage, also with its own premium and cost-sharing rules. Between those parts, you’re still on the hook for deductibles, copays, and anything Medicare doesn’t cover at all, like most dental and vision care.
Dental and vision gaps catch people off guard because they assume Medicare works like an employer plan that bundles everything together. Standalone dental plans and vision riders exist to fill this specific gap, and pricing dental coverage before you retire beats discovering the gap at your first post-retirement checkup.
You’ll also choose between two paths for filling in what original Medicare leaves out: adding a Medicare Advantage plan that bundles coverage together, or a Medigap policy. Each path shifts your costs between monthly premiums and out-of-pocket spending in a different way, and the better fit for you depends on how much care you expect to use.
Higher earners face one more wrinkle. Medicare adds an income-based surcharge called IRMAA on top of standard Part B and Part D premiums once your income crosses certain thresholds. It’s worth understanding before you hit 65, since IRMAA is based on your income from two years earlier, not your income in the year you turn 65.
On the other end of the income range, Medicare Savings Programs and the Part D Extra Help program can reduce or eliminate premiums and cost-sharing for people who qualify based on income and assets. It’s worth checking eligibility directly rather than assuming these programs only apply to a narrow group.
Some people keep working part of the way past 65, either by choice or because they’re not ready to stop. If you’re still covered by an employer’s group health plan at 65, you can often delay enrolling in Medicare without a penalty, using a Special Enrollment Period once that coverage ends.
Skip this step without qualifying coverage and the penalty follows you for good. Missing your enrollment window carries a permanent surcharge on both Part B and Part D, worth understanding in full before you assume you’ll get to it eventually.
Medicare doesn’t pay for extended custodial care, full stop. That gap sits outside every number discussed so far, and it’s often the largest of the three.
Long-term care costs vary widely depending on the type of care and where you live, but assisted living and nursing home costs both run into six figures over a multi-year stay. Median assisted living runs about $5,900 a month, and the full cost breakdown by care type is worth reviewing given how wide that range gets.
Some people self-fund this with a dedicated reserve. Others buy long-term care insurance to cap the risk. For those who exhaust their savings, Medicaid steps in as a means-tested backstop, though eligibility rules vary by state and often require spending down assets first.
Because the cost range is so wide and the funding options so different from ACA premiums or Medicare cost-sharing, long-term care works better as its own budget line than folded into a general healthcare number.
A Health Savings Account (HSA) is one of the few tools that touches every stage of this timeline instead of just one.
Before 65, HSA funds can pay COBRA premiums and other qualified medical costs while you’re bridging to Medicare. After 65, you can use the same account to pay Part B, Part D, and Medicare Advantage premiums tax-free, though you can no longer contribute once you’re enrolled. Whatever’s left in the account can also help cover long-term care costs down the road.
For 2026, the IRS caps HSA contributions at $4,400 for self-only coverage and $8,750 for family coverage, with an extra $1,000 catch-up if you’re 55 or older. None of that money expires at year’s end. Unused balances carry forward and keep growing, which is what makes an HSA behave more like a retirement account than a typical benefit. Contributions go in pretax, growth is tax-free, and qualified withdrawals come out the same way, which makes an HSA one of the few accounts that’s tax-advantaged coming and going.
A few moves are worth making before any of these phases start. If you still have access to a high-deductible health plan, build your HSA balance while you’re working, since you can’t contribute once Medicare begins. Get real quotes for both Medigap and Medicare Advantage before you turn 65, rather than defaulting to whichever one a friend recommended. And if you’re retiring early, line up your bridge coverage before your last day of work rather than during the gap itself.
None of these decisions happen in isolation. That’s the case for looking at all three phases together instead of checking them off one at a time.
Treating these phases separately misses something important: a decision in one phase can reshape the numbers in another.
A Roth conversion or a large one-time withdrawal raises your income for that year. That higher income can shrink your ACA subsidy if you’re under 65, and it can raise your Medicare premium two years later through IRMAA once you’re enrolled. The same dollar decision touches both systems, just on different timelines. Look at either phase alone and you’ll miss how the other one responds.
This is where a year-by-year view earns its keep. The Boldin Planner models pre-Medicare ACA costs, Medicare and IRMAA tiers, HSA contributions and withdrawals, and a long-term care reserve together, so you can see how a withdrawal choice at 63 shows up in your Medicare premium at 65 before you’ve made it.
Run your own numbers through the Boldin Planner and these three phases turn into one plan instead of three separate guesses.
For retirement planning, split your healthcare budget into three separate lines instead of one. Budget pre-Medicare bridge coverage if you’re retiring before 65. Add Medicare-era costs, guided by Fidelity’s $185,500 benchmark. Then add a long-term care reserve on top of both. None of the three behaves like the others, and Fidelity’s number only covers the middle one.
You’ll need to secure your own health insurance coverage until Medicare starts at 65. Options include the ACA marketplace, COBRA from a former employer, or a spouse’s employer plan. Costs vary by state, income, and plan tier. Your income during these years can also affect how much ACA subsidy you qualify for.
Medicare stops covering long-term care once a stay goes past a short-term skilled nursing benefit. After that, you’re covering it yourself. Options include a dedicated reserve, long-term care insurance, or Medicaid once your assets are spent down to your state’s eligibility limit. Fidelity’s figure treats long-term care as its own category for the same reason. It doesn’t behave like a Medicare premium or copay, and it needs its own line in your plan.
HSA funds can pay Medicare Part B, Part D, and Medicare Advantage premiums tax-free once you’re enrolled. You can’t contribute new money to the account after enrolling. Funds already there stay usable for these premiums and other qualified medical expenses.
The choice between Medicare Advantage or Medigap comes down to how you want to balance monthly premiums against out-of-pocket spending. Medicare Advantage plans often carry lower premiums but cap your annual out-of-pocket costs higher. Medigap plans cost more upfront but cover close to everything original Medicare doesn’t. The better fit depends on how much care you expect to use and how much cost certainty matters to you.
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