A 65-year-old couple retiring this year will need a staggering $388,000 to $395,000 in savings to cover their health care costs throughout retirement, assuming both have traditional Medicare, according to the latest Milliman Retiree Health Cost Index .
This eye-opening figure highlights the growing financial challenge health care poses for America’s aging population.
The Milliman report, released this week, underscores that health care is likely to be one of the largest—and most unpredictable—expenses retirees will face. The estimate includes premiums, deductibles, copays, and other out-of-pocket costs not covered by Medicare, but does not account for long-term care, dental, or vision expenses, which could drive costs even higher.
For individuals, the numbers are equally daunting. The report finds that a 65-year-old man retiring in 2025 will need about $281,000 in savings for health care, while a woman will need $320,000—a difference attributed to women’s longer average life expectancy and greater health care needs in later years.
Milliman’s analysis is based on current Medicare coverage and cost trends, and it reflects the continued rise in medical expenses. Over the past decade, the amount retirees need to save for health care has steadily increased, driven by higher premiums, prescription drug costs, and the overall rise in health care spending.
While the $388,000 to $395,000 figure applies to couples with traditional Medicare, the report notes that those who choose Medicare Advantage Prescription Drug (MAPD) plans may face lower required savings. For example, a man with a MAPD plan would need at least $86,000 in savings, though these plans often come with trade-offs such as limited provider networks and varying out-of-pocket maximums.
Financial experts warn that many Americans underestimate the true cost of health care in retirement.
“Many factors can impact the amount of savings retirees need for their healthcare, including when they retire, where they live, health status and the type of coverage they have,” said Robert Schmidt, co-author of the Retiree Health Cost Index and principal and consulting actuary at Milliman. “Understanding what these costs are and how they can change year-to-year is key for both consumers and employers.”
To help manage these costs, advisors recommend maximizing contributions to Health Savings Accounts (HSAs), taking advantage of employer-sponsored retirement plans, and considering supplemental insurance options. Early and consistent planning, they say, is key to avoiding financial surprises later in life.
As the U.S. population ages and health care costs continue to climb, the Milliman report serves as a stark reminder: preparing for retirement means planning not just for daily living expenses, but for the substantial—and growing—cost of staying healthy in one’s later years.
No wonder that many Americans are starting to explore whether alternatives to Medicare, such as healthshare programs, might not help them plan better for their golden years.