This is the ideal retirement strategy if you want to keep your healthcare costs down

A lot of it comes down to whether you retire a few years before enrolling in Medicare at age 65 or a few years after, according to research from the actuarial and consulting firm Milliman, which last month published its 2026 Retiree Health Cost Index.

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The high cost of healthcare in retirement is striking and, to some pre-retirees and retirees, surprising.

“We’ve found that over time, healthcare costs can be one of the larger expenses that people face in retirement,” said Frank Maltais, a Fidelity financial consultant in Portland, Maine.

Overall, according to the Senior Citizens League’s 2025 Senior Survey, the median senior spends $401 to $600 a month on healthcare, while one in five spends $12,000 or more annually. The Affordable Care Act allows insurers to charge older adults premiums that are up to three times higher than what younger people pay.

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“It’s unfortunate that our healthcare costs are rising at the exact same time our income tends to fall,” said Matthew Rutledge, a research fellow at the Center for Retirement Research at Boston College who studies health costs in retirement.

Although 60% of Americans have witnessed someone in their life struggle with healthcare costs in retirement, only 48% of the public has factored such costs into their retirement planning and just 23% have discussed the topic with a financial adviser, according to a survey from D.A. Davidson, a financial firm. “It’s just an avoidance mindset,” noted Andrew Crowell, vice chair of wealth management at D.A. Davidson.

One key factor determining how much older adults will shell out for health care is the age at which they retire, according to Milliman.

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Its researchers determined that people retiring at 60 can expect to pay roughly 59% more in health expenses than if they retired at 65 and then signed up for traditional Medicare, a Medigap supplemental plan and a Medicare Part D prescription drug plan.

Worse: They’d pay 91% more than if they waited to retire at 65 and then enrolled in a private insurer’s Medicare Advantage plan with prescription-drug benefits. (These figures assume people in their early 60s buy a Bronze plan through the Affordable Care Act marketplace.)

“Because there’s no Medicare for those five years before 65, it’s a lot more expensive period of time to try to cover your health expenses,” said Robert Schmidt, a principal at Milliman.

The vastly higher out-of-pocket costs for people who retire early, Schmidt said, are because they must cover their own insurance costs before getting the benefit of a Medicare plan at age 65.

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“Buying insurance on your own between age 60 and 65 is much more expensive than at any other point in your life,” Rutledge noted.

But, Milliman said, continuing to work until age 70 can be a huge money saver when it comes to healthcare. Delay retirement until five years after Medicare kicks in and you can expect to pay about 29% less for health expenses than the average retiree if you have traditional Medicare, Medigap and a Part D plan, or roughly 30% less than the average retiree if you have Medicare Advantage.

Even those on Medicare can face sizable out-of-pocket health costs for several reasons:

• Medicare typically doesn’t cover long-term-care costs, which can amount to $75,000 a year or more, according to CareScout.
• Traditional Medicare excludes most vision, hearing and dental expenses and routine foot care, although Medicare Advantage plans usually offer some coverage for those things.
• Premiums for Medicare Part B (which covers doctor services, outpatient care and some home healthcare) shot up 10% in 2026, to $202.90 monthly, and “no relief is on the horizon,” Alicia Munnell, senior adviser at the Center for Retirement Research and MarketWatch columnist, recently wrote. Medicare beneficiaries with income above $109,000 (or above $218,000 for married couples filing jointly) pay much steeper Part B premiums because they owe the Income-Related Monthly Adjustment Amount surcharge. IRMAA can boost total Part B premiums for 2026 to $8,280.
• Premiums for Medigap policies — purchased by 43% of people with traditional Medicare — have been increasing by double-digit percentages, sometimes as high as 45%. The average monthly premium for the popular Plan G policy is $120 to $250 — or $1,440 to $3,000 annually.

The best way to keep healthcare costs down in retirement is by staying healthy or getting healthier.

Healthier retirees can expect to spend about 9% less on health costs than average retirees if they have traditional Medicare, Medigap and Part D, and roughly 27% less than average retirees if they have Medicare Advantage, according to Milliman. Conversely, those with below-average health spend about 13% more than average retirees if they go the traditional Medicare route and 41% more if they have Medicare Advantage.

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Other suggestions from experts:

For pre-retirees in their 50s and 60s

Fund a health savings account if you can. This underutilized employee benefit is like a 401(k) for health costs. It’s available to people who aren’t on Medicare and who have a health-insurance plan with a high deductible — over $1,700 for individuals or $3,400 for families. In 2026, it lets you put up to $4,400 ($8,750 for families) into an investment account whose contributions are pretax, whose earnings grow tax-free and whose withdrawals for medical expenses are tax-free. The catch: In order for the HSA to grow so you can use it in retirement, you have to pay a large portion of your healthcare expenses out of pocket before your insurance kicks in.

Look into buying a long-term-care insurance policy. You’ll have a better chance of being approved, and your premiums will be lower, than if you wait to apply in your 70s or 80s. “I’ve had three clients who I thought would be perfectly eligible but were denied long-term-care policies,” said Crowell.

A hybrid long-term-care policy provides a death benefit as well as coverage for care at home, in an assisted-living facility or in a nursing home.

For Medicare beneficiaries

Keep working full time as long as possible. “The longer you can stay on somebody else’s health insurance, the better,” said Rutledge. If your company has 20 or more employees, its health plan will be your primary insurer and Medicare will be secondary. It’s the reverse for smaller firms.

Retiree health coverage provided by employers has become increasingly rare, and only 19% of part-time workers have health coverage from those jobs, according to KFF, a health-policy research organization.

When choosing between traditional Medicare and a Medicare Advantage plan, be realistic about your current health and potential medical issues ahead. “If a person is not healthy or will go through a lot of healthcare expenses in a year, a Medicare Advantage plan might exceed the cost of traditional Medicare, a supplemental plan and a Part D plan,” said Maltais.

Run the numbers to see if you’ll owe stiff IRMAA premiums. The IRMAA surcharge, tacked on to some beneficiaries’ Part B and Part D premiums, is based on your income from two years ago. That figure includes earned income, interest and dividends, capital gains, pension benefits, Social Security benefits, rental income and retirement-plan distributions.

Warning: A Roth conversion — moving money from a traditional IRA or 401(k) into a Roth IRA to save on income taxes — can push you into IRMAA territory, Maltais noted. “If someone does a big Roth conversion that increases their income, all of the sudden their Medicare premiums can more than double in some cases,” he said.