Retiring before Medicare can send health costs soaring

Retiring at 60 can make healthcare far pricier than waiting until Medicare begins at 65, according to Milliman’s 2026 Retiree Health Cost Index.

The actuarial and consulting firm found that a person who leaves work at 60 could spend about 59% more on health costs than someone who retires at 65 and uses traditional Medicare with a Medigap policy and a Part D drug plan. Compared with a 65-year-old who picks a Medicare Advantage plan with drug benefits, the early retiree’s costs could be 91% higher.

Milliman said those figures assume people in their early 60s buy a Bronze plan through the Affordable Care Act marketplace. Robert Schmidt, a principal at Milliman, said the expensive gap comes from having to buy coverage before Medicare eligibility.

Working longer can flip the math. Milliman said delaying retirement until 70 could cut healthcare expenses by about 29% versus the average retiree for someone using traditional Medicare, Medigap and Part D. For Medicare Advantage enrollees, the reduction is roughly 30%.

The retirement health bill is already steep

Fidelity estimates that a 65-year-old retiring this year can expect to spend an average of $185,500 on healthcare during retirement. That estimate does not include long-term care or dental costs, and Fidelity said it is up 7.5% from last year.

If that retiree lives to 85, the Fidelity figure works out to about $9,250 a year. Frank Maltais, a Fidelity financial consultant in Portland, Maine, said healthcare can become one of the larger retirement expenses people face.

The Senior Citizens League’s 2025 Senior Survey found that the median senior spends $401 to $600 a month on healthcare. One in five spends at least $12,000 a year, according to the group.

D.A. Davidson, a financial firm, found in a survey that 60% of Americans have seen someone struggle with healthcare costs in retirement. Yet only 48% have included those costs in retirement planning, and 23% have discussed them with a financial adviser, according to the firm.

Medicare does not erase the tab

Medicare still leaves retirees exposed to several big bills. CareScout says long-term care can cost $75,000 a year or more, and Medicare generally does not cover it.

Traditional Medicare also leaves out most dental, vision and hearing costs, along with routine foot care. Medicare Advantage plans often provide some coverage in those areas.

Medicare Part B premiums rose 10% in 2026 to $202.90 a month, according to Alicia Munnell, senior adviser at the Center for Retirement Research at Boston College. Higher-income beneficiaries can owe the Income-Related Monthly Adjustment Amount, known as IRMAA, which can bring total 2026 Part B premiums to $8,280.

Medigap premiums are another pressure point. The report said 43% of people with traditional Medicare buy Medigap coverage, and premiums have been rising by double-digit percentages in some cases. The popular Plan G policy averages $120 to $250 a month.

Ways to trim the damage

Milliman found that healthier retirees spend less: about 9% below average with traditional Medicare, Medigap and Part D, and about 27% below average with Medicare Advantage.
People who qualify can use a health savings account. In 2026, eligible individuals can contribute up to $4,400, while families can contribute up to $8,750.
Experts cited by MarketWatch said pre-retirees may want to examine long-term-care insurance before their 70s or 80s, when approval can be harder and premiums higher.
Matthew Rutledge of the Center for Retirement Research said staying on an employer plan longer can help. If an employer has at least 20 workers, its plan is primary and Medicare is secondary.
KFF says retiree health coverage from employers has become rare, and only 19% of part-time workers receive health coverage through those jobs.

Maltais also warned that retirees should check whether income moves, including a Roth conversion, could trigger IRMAA surcharges and raise Medicare premiums.

This story draws on original reporting from MarketWatch.