Transparent method
The formula
Worked example
Example inputs
How to interpret the result
Healthcare cost projections extended across a multi-decade retirement are sensitive to both the inflation-rate assumption and the assumed length of retirement itself, and healthcare costs have historically run ahead of general inflation, which means a generic inflation assumption can understate the real projected total by a meaningful margin.
Before you rely on it
What to check
Run the projection under more than one inflation and longevity assumption, since healthcare-specific inflation has historically outpaced general inflation and a single assumption can understate the real cost.
The common error
Where people go wrong with retirement healthcare cost calculator
Applying a general inflation rate to a healthcare cost projection rather than a healthcare-specific rate. Healthcare costs have historically risen faster than general inflation, and using the wrong rate understates the real long-term total.
Sensitivity evidence
How current annual healthcare cost changes the first-year retirement cost
| Current annual healthcare cost | First-year retirement cost | Simple lifetime retirement cost |
|---|---|---|
| $9,600 | $19,958 | $498,943 |
| $10,800 | $22,452 | $561,311 |
| $12,000worked example | $24,947 | $623,678 |
| $13,200 | $27,442 | $686,046 |
| $14,400 | $29,937 | $748,414 |
Every input, tested
Which input moves the first-year retirement cost most
| Input | Tested from | To | First-year retirement cost at each end | Swing |
|---|---|---|---|---|
| Years until retirement | 11.0 years | 19.0 years | $20,524 to $30,323 | $9,799 (39%) |
| Healthcare inflation | 4.0% | 6.0% | $21,611 to $28,759 | $7,147 (29%) |
| Current annual healthcare cost | $10,800 | $13,200 | $22,452 to $27,442 | $4,989 (20%) |
| Years in retirement | 19.0 years | 31.0 years | $24,947 to $24,947 | none |
Two variables at once
First-year retirement cost by current annual healthcare cost and healthcare inflation
| Current annual healthcare cost \ Healthcare inflation | 3.0% | 5.0% | 7.0% |
|---|---|---|---|
| $9,600 | $14,956 | $19,958 | $26,487 |
| $10,800 | $16,826 | $22,452 | $29,798 |
| $12,000 | $18,696 | $24,947 | $33,108 |
| $13,200 | $20,565 | $27,442 | $36,419 |
| $14,400 | $22,435 | $29,937 | $39,730 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Current annual healthcare cost | $12,000 |
| Healthcare inflation | 5.0% |
| Years until retirement | 15.0 years |
| Years in retirement | 25.0 years |
| First-year retirement cost | $24,947 |
| Simple lifetime retirement cost | $623,678 |
Complete evidence
Full projection schedule
Show all 15 rows
| Period | Opening balance | Contribution | Growth | Ending balance |
|---|---|---|---|---|
| Year 1 | $12,000 | $0.00 | $600 | $12,600 |
| Year 2 | $12,600 | $0.00 | $630 | $13,230 |
| Year 3 | $13,230 | $0.00 | $662 | $13,892 |
| Year 4 | $13,892 | $0.00 | $695 | $14,586 |
| Year 5 | $14,586 | $0.00 | $729 | $15,315 |
| Year 6 | $15,315 | $0.00 | $766 | $16,081 |
| Year 7 | $16,081 | $0.00 | $804 | $16,885 |
| Year 8 | $16,885 | $0.00 | $844 | $17,729 |
| Year 9 | $17,729 | $0.00 | $886 | $18,616 |
| Year 10 | $18,616 | $0.00 | $931 | $19,547 |
| Year 11 | $19,547 | $0.00 | $977 | $20,524 |
| Year 12 | $20,524 | $0.00 | $1,026 | $21,550 |
| Year 13 | $21,550 | $0.00 | $1,078 | $22,628 |
| Year 14 | $22,628 | $0.00 | $1,131 | $23,759 |
| Year 15 | $23,759 | $0.00 | $1,188 | $24,947 |
Where the inputs come from
Current annual healthcare cost is what you spend now on premiums and out-of-pocket care, and healthcare inflation is your assumption for how fast those costs rise; medical prices have often risen faster than general inflation. Years until retirement and years in retirement set the horizon. Use your actual spending, including dental, vision and prescriptions, which Medicare only partly covers.
When the result stops applying
The lifetime total here is simple and does not inflate costs during retirement or reflect premium changes such as IRMAA surcharges. Medicare covers many but not all costs and does not pay for most long-term care. Health varies widely, so a healthy retiree may spend much less and someone with a chronic illness much more. Employer retiree coverage changes the picture.
What to compare it with
Add long-term care with the long-term care cost calculator, and the pre-Medicare bridge with the early retirement health insurance calculator. The IRMAA page checks income-based surcharges. A health savings account, if you have one, can fund these costs with tax-free withdrawals.
People also ask
Frequently asked questions
How much does healthcare cost in retirement?
Estimates for a couple retiring today commonly run to several hundred thousand dollars over retirement, excluding long-term care, but individual costs vary widely.
Does Medicare cover everything?
No. Medicare has premiums, deductibles and coinsurance, and it does not cover most long-term care, routine dental or vision, so supplemental coverage or savings are needed.
What healthcare inflation should I use?
Many planners use 4% to 6%, above general inflation, since medical prices have tended to rise faster than the overall price level.