Apr 15, 2026
It may be time to update the perceived 'magic number' needed to retire comfortably — currently $1.46 million according to a Northwestern Mutual poll (1). Turns out Americans may need to set aside hundreds of thousands just for health care.
How about a 65-year-old couple needing $469,000 to cover most of their future health needs? That's one of the figures in a new Employment Benefit Research Institute (EBRI) study (2). Moneywise spoke with study co-author Jake Siegel about some of the eye-watering estimates.
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The EBRI determined that for 65-year-old Americans retiring now:
- A couple would need upwards of $469,000 set aside to be 90% sure most of their future health needs were covered.
- A single man would need upwards of $212,000.
- A single woman would need upwards of $252,000 because women tend to live longer (3).
It's not that you can't save up less than $469,000. It's just that your future becomes cloudier. Regardless, the figures are alarming.
"They're still something to make you queasy at night," Siegel said.
"Our estimates don't even look at the cost of nursing homes and you hear about astronomical costs," Siegel said. "We're still trying to get our arms around how to model that."
They do take into account the cost of health-care premiums, medications and other out-of-pocket expenses.
Florida-based doctor and certified financial planner Carolyn McClanahan told CNBC that such costs can be a shock to older Americans, often coming with an unexpected medical crisis (4).
"What most people don't understand is that out-of-pocket costs can be significant once they get sick, which is usually later in retirement," she said. "No one thinks about it until it hits them in the pocketbook."
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Here's a look at why you need to set aside more than ever for health care in retirement — along with some advice on how to do it.
Retirees must fill health-cost gaps with Medigap
Concerningly, the EBRI's estimates apply to people enrolled in Medicare, the federal program that provides health coverage for Americans 65 and older.
The EBRI focused on future out-of-pocket health costs for Americans enrolled in Medicare's Medigap Plan G (5). That's a huge group: 46% of Americans aged 65 and older as of 2022.
Medigap tops up Medicare parts A and B to cover some (not all) out-of-pocket health expenses, like copayments for a doctor visit (6). But it doesn't cover everything. For example, Medigap Plan G doesn't cover dental, vision or prescription costs (7).
"Medicare doesn't function like health-care coverage with an employer," Siegel said, noting that this can be a shock to someone who has just left the workforce and is used to workplace coverage.
Workplace health insurance is likelier to cover the costs of an employee's chronic conditions after employees pay their deductible. Medigap Plan G covers more of those costs than standard Medicare, but you pay a price for that extra coverage in the form of premiums (8).
Siegel says those premiums are where the big out-of-pocket health costs come from for retiring Americans. Medigap monthly premiums range widely across the country — from $122 in New Mexico (9) to $509 in New York (10).
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Siegel, who is 39, added that these costs are likely to go up for his generation and others who still have years left until retirement age. Younger folks potentially have even more retirement years ahead of them thanks to medical advances.
"I was at an AI symposium and they were talking about advances in medical technology and advising financial clients to plan to live to 100 and adjust their asset allocations accordingly," he said.
Another cloud on the horizon is the future of Medicare itself. The Medicare Trust Fund may be insolvent by 2031, according to recent estimates (11).
Siegel notes that will force policymakers to decide whether to raise taxes to support Medicare or reduce coverage or both.
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How to reduce the cost of health care in retirement
For now, Siegel said one way retirees can reduce the out-of-pocket costs of health care is to lower premiums by switching from Medigap Plan G to Medicare Advantage. It is not only less expensive but offers more fulsome coverage after you hit an out-of-pocket maximum.
"It's an increasingly popular way for beneficiaries to receive Medicare benefits," Siegel said, with 32.8 million Americans enrolled as of 2024, according to KFF (12).
According to EBRI's calculations, with Medicare Advantage, the stash of health cash 65-year-old Americans would need to cover most health in retirement drops dramatically:
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- A couple would need $203,000 of their own funds (instead of $469,000) to be 90% sure most of their future health needs were covered.
- A single man would need upwards of $106,000 (instead of $212,000).
- A single woman would need upwards $125,000 (instead of $252,000).
So why would anyone stick with Medicare instead of switching to Medicare Advantage? Siegel says there is a tradeoff.
While traditional Medicare has no restriction on which doctors or specialists you see, Medicare Advantage only permits visits to its list of approved providers, meaning your favorite doctor may be out of network.
"There are a lot of extra hoops you have to jump through (with Medicare Advantage)," he said, including getting prior authorization regarding certain medications and services.
If retirement is further away, it's a good idea to start saving for your health needs now as part of a broader retirement plan — including contributing to an IRA, Roth IRA or 401(k). It's also a good idea to set up a Health Savings Plan (HSA) to finance your health-care expenses in retirement.
Siegel said the EBRI is tracking the growth in popularity of HSAs across the country. While most HSA accounts remain modest, they continue to grow, he said.
"Those accounts are helping folks finance those eye-wateringly large sums," he said.
Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.
Northwestern Mutual (1); Employment Benefit Research Institute (2); The Hill (3); CNBC (4); KFF (5),(8),(12); Healthline (6); Medical News Today (7); MoneyGeek (9); NerdWallet (10); U.S. Senate (11)
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Laura Boast is an Associate Editor with Moneywise.com and a lifelong content creator who's worked for Discovery, CBC, Blue Ant Media and Bond Brand Loyalty among other organizations. She’s covered everything from consumer affairs to comets, chimps and cars. She’s obsessed with home design shows.
