Healthcare Costs Vary by Age and U.S. State: A Breakdown

Healthcare Costs Vary by Age and U.S. State: A Breakdown

Rising Health Care Costs in Retirement: What You Need to Know

Retirement can be a time of relaxation and enjoyment, but it also comes with significant financial considerations, particularly when it comes to health care expenses. According to recent data, a 65-year-old retiring in 2025 can expect to spend an average of $172,500 on health care and medical expenses throughout retirement, reflecting a more than 4% increase from 2024 and a steady rise since 2002 [1][2][3][5].

This trend is not unique to this age group. People aged 55 and older account for over half (56%) of total health spending, even though they make up only 31% of the U.S. population, indicating much higher annual spending compared to younger age groups [5]. Monthly premiums for health insurance (like Silver tier ACA plans) tend to increase with age: those over 55 pay 50% to 100% more than younger adults, and people 65 and older pay even more, often due to additional needs and higher utilization of medical services [5].

Medicare costs for seniors typically include monthly premiums (commonly around $185 for Parts A and B) but additional costs such as deductibles and out-of-pocket expenses contribute to overall higher health spending as people age [4]. Out-of-pocket expenses, which are more challenging to plan for, account for 27% of overall medical costs [1].

However, there are steps that individuals can take to help manage these costs. RBC Wealth Management advises younger savers to create a long-term investment plan to help cover health care costs in retirement. Investing in a Roth 401(k) is another savings vehicle to consider, as you can withdraw your retirement savings tax-free [3]. Using tax-friendly health savings accounts (HSAs) can also reduce the onerous impact of high medical costs in your golden years [1].

It's also important to be aware of government policies that may affect health care costs. For example, if you are 63 or older, remember to account for the IRMAA two-year rule. Additionally, Medicare Part B costs are expected to rise more than 11% in 2026 [6].

A new analysis of initial rate filings for Affordable Care Act (ACA) Marketplace plans submitted by 312 insurers in all 50 states and the District of Columbia finds the median proposed increase for 2026 is 18% [7]. However, it's worth noting that only 10.9% of retirees experienced an increase in medical costs between $2,000 and $5,000 over a two-year period [1], while just 2% of retirees experienced an increase of $25,000 or more over a 24-month span [1].

Government data show that about 70% of older adults require long-term care [8]. While these costs can be significant, there are options available for financial assistance, such as Medicaid and long-term care insurance.

In conclusion, health care costs rise sharply as people move into middle and older age, with retirees facing substantial cumulative expenses over time. However, by taking advantage of workplace wellness programs, creating a long-term investment plan, considering tax-friendly savings vehicles like Roth 401(k)s and HSAs, and being aware of government policies, individuals can take steps to help manage these costs and enjoy a comfortable retirement.

References: [1] HealthView Services, 2022 Retirement Health Care Costs Data Report. [2] HealthView Services, 2023 Retirement Health Care Costs Data Report. [3] RBC Wealth Management, Preparing for Health Care Costs in Retirement. [4] Medicare.gov, Costs for Medicare. [5] Kaiser Family Foundation, Health Spending Accounts for Older Adults. [6] Medicare.gov, 2026 Medicare Part B Premiums and Deductibles. [7] Kaiser Family Foundation, ACA Marketplace Premium Changes for 2026. [8] National Academy of Elder Law Attorneys, Long-Term Care Planning.

1. Despite the advancements in science and medical-conditions, health-and-wellness expenses continue to rise significantly for retirees, especially considering the estimated $172,500 health care and medical costs for a 65-year-old retiring in 2025.
2. To effectively manage these escalating expenses, individuals should consider long-term investment plans and savings vehicles like Roth 401(k)s and health savings accounts (HSAs) to help alleviate the financial burden associated with health-and-wellness concerns during retirement.

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