Retirees confront an unexpected $345,000 expense, and most are ill‑prepared

(SeaPRwire) –   Medical advancements have lengthened the “golden years” for numerous retirees—simultaneously increasing how many years their retirement savings need to cover daily living costs. 

These extra years often come with a steep cost due to escalating healthcare expenses. Recent research indicates that healthcare can turn into a six-figure expense during retirement, even for individuals who follow all the “right” steps. However, planning efforts are falling behind. A recent D.A. Davidson survey of U.S. adults revealed that although 80% are worried about retirement healthcare costs, less than half have taken action to prepare for them. What’s causing this gap?

A common reason people put off planning is a well-known excuse: “I’m healthy and take good care of myself.” This boils down to optimism bias—the idea that “bad things won’t happen to me” — which can subtly lead to inactivity. 

While healthy habits are important, they don’t remove the risk of incurring healthcare costs. For many retirees, the shock isn’t that healthcare expenses exist—it’s their size and how rapidly they can spike after a diagnosis, medical procedure, or new prescription. Longer lifespans require savings to go further, and healthcare costs typically outpace general inflation. This uncertainty makes it easy to put the topic on the back burner. The D.A. Davidson survey found that just 16% of respondents feel highly informed about potential retirement healthcare costs.

Another factor contributing to delay is the assumption that “Medicare will cover everything.” Medicare is a crucial base, but it’s not a full solution nor does it limit spending. Retirees may still face substantial out-of-pocket expenses, including:

• Premiums and cost-sharing
• Dental, vision, and hearing costs
• Specific prescription expenses
• Long-term custodial care
• Network and out-of-area restrictions, based on plan structure

For many people approaching retirement who have had employer-provided insurance for decades, Medicare’s rules and trade-offs are unfamiliar, leading them to easily underestimate the actual cost of healthcare in retirement. 

Several studies suggest Medicare covers about two-thirds of total healthcare costs, leaving the rest to be paid by retirees.

Creating a ‘Healthcare Expense Portfolio’

Given the unpredictability of future healthcare needs, many retirees create what I refer to as a “healthcare expense portfolio”: a combination of resources that work in tandem instead of depending on one method alone. This might include savings, a Health Savings Account (HSA) if they qualify, and choices about supplemental coverage, along with other tools. The D.A. Davidson survey found that the most frequently mentioned strategies were Medicare Advantage or supplemental Medicare plans (47%), retirement accounts (35%), personal savings accounts (34%), long-term care insurance (17%), and HSAs (13%).

For certain retirees, a continuing-care retirement community—offering tiered levels of support—can be part of this portfolio. Three of my clients, all widows, valued the peace of mind that comes with knowing their care needs would be addressed if their health changes over time. Each of them used their home equity to pay the community’s entry fee. While this was a significant lifestyle choice, it gave them structure, support, and an inherent social network.

Tackling the ‘Second Mortgage’ Burden

Fidelity’s 2025 Retiree Health Care Cost Estimate projects that even with a fully paid mortgage, a retired couple could face $345k+ in out-of-pocket healthcare costs during their retirement—similar to purchasing a second home after you thought your first was paid off. This isn’t an abstract issue: the D.A. Davidson survey found that 60% of Americans have seen someone struggle with retirement healthcare costs. This reality makes the absence of planning even more striking.

The consequences of delaying planning are real: less time to save (or to save using the most tax-efficient methods), fewer opportunities to adjust retirement timing, spending, or housing if costs end up higher than anticipated, and a higher likelihood of making rushed decisions during a health crisis—when you’re least clear-headed and costs are at their peak. Effective planning isn’t about forecasting the future; it’s about building financial strength to handle unexpected events.

Collaborating with a financial expert to include healthcare in a holistic plan can help translate worry into action—by calculating potential costs, finding gaps in coverage or savings, and testing how well the plan holds up against less predictable situations.

The D.A. Davidson survey revealed that just 23% of Americans have ever talked about retirement healthcare costs with a financial advisor. The optimal time to deal with this issue is before decisions become pressing.