The Retirement Age That Adds Tens of Thousands in Medical Bills

A 65‑year‑old retiring today can expect to spend an average of $185,500 on healthcare over the rest of their life, not including long‑term or dental care, according to Fidelity. That figure rises annually — it jumped 7.5% this year alone — and translates to roughly $9,250 a year for someone living to 85. What many pre‑retirees don’t realize is that the age they stop working is the single biggest lever on those bills.

New research from the actuarial firm Milliman quantifies just how dramatically retirement timing reshapes lifetime health spending. Its 2026 Retiree Health Cost Index found that a person who retires at 60 will pay about 59% more than someone who retires at 65 and signs up for traditional Medicare plus a Medigap supplement and Part D drug plan. The gap widens to 91% when compared with a 65‑year‑old who chooses a Medicare Advantage plan that includes drug benefits. The reason: between 60 and 65, there is no Medicare safety net. That five‑year gap forces early retirees to buy individual insurance — often a Bronze plan through the Affordable Care Act marketplace — at premiums that can legally be three times higher than those charged to younger adults.

Conversely, staying on the job until 70 flips the math. A 70‑year‑old can expect to pay roughly 29% less (with traditional Medicare/Medigap/Part D) or 30% less (with Medicare Advantage) than the typical retiree, largely because they have five additional years of employer‑based coverage before or alongside Medicare. The analysis from Milliman makes a compelling case that, for those who can manage it, working a few years longer is not just a wage‑earner’s decision — it’s a healthcare cost‑containment strategy.

Why Pre‑65 Coverage Is So Expensive — and Where the Real Savings Hide

The Pre‑65 Insurance Gap — Why Five Years Cost 59% More

When you leave the workforce before 65, you lose access to group health plans and step into the individual market. The Affordable Care Act allows insurers to charge older policyholders up to three times the premium they charge a 21‑year‑old, so a Bronze plan for a 62‑year‑old can easily exceed $1,000 a month in premiums before deductibles. Milliman’s modeling shows that those five pre‑Medicare years alone account for the bulk of the extra 59% cost versus someone who waits until 65 and moves straight onto Medicare. Robert Schmidt, a principal at Milliman, put it bluntly: “Because there’s no Medicare for those five years before 65, it’s a lot more expensive period of time to try to cover your health expenses.”

Delaying Retirement to 70 Shifts Who Pays

Once Medicare kicks in at 65, the cost curve bends sharply. For a worker who stays employed until 70, an employer plan (for firms with 20+ employees) remains the primary insurer, with Medicare as secondary coverage. That arrangement slashes out‑of‑pocket spending and bridges the gap to an age when health needs typically intensify. Milliman’s 29%–30% savings for the late‑retirement scenario primarily reflects this employer‑plan subsidy and the avoidance of having to self‑fund insurance in one’s early 60s.

HSAs: The Tax‑Efficient Retirement Account Few Use

Health savings accounts offer a triple tax advantage — pretax contributions, tax‑free growth, and tax‑free withdrawals for medical expenses — yet they remain underused. In 2026, contribution limits are $4,400 for individuals and $8,750 for families, but only those with a qualifying high‑deductible health plan (minimum deductibles of $1,700/$3,400) are eligible. The trade‑off is real: to let the HSA grow for retirement, you must pay a large portion of your healthcare bills out of pocket today. Still, Frank Maltais of Fidelity notes that over time, the account can become a dedicated pot to cover Medicare premiums, deductibles, and a wide range of qualified expenses, all tax‑free.

IRMAA — The Income Trap That Doubles Premiums

Medicare beneficiaries with income above $109,000 ($218,000 for couples) face the Income‑Related Monthly Adjustment Amount surcharge, which can push Part B premiums from $202.90 a month to as high as $8,280 a year. The income calculation looks back two years, so a one‑time Roth conversion that spikes income may trigger IRMAA two years later. Alicia Munnell, senior adviser at the Center for Retirement Research, warned that “no relief is on the horizon” for rising premiums, making it critical to model the IRMAA impact before any large retirement‑account conversion.

Five Moves to Cut Your Retirement Healthcare Tab

  • Delay retirement if you can. Working until at least 65 — or even 70 — avoids the high cost of individual insurance before Medicare. Milliman’s data show that waiting until 70 can cut lifetime health spending by nearly 30% compared to the typical retiree. If your employer has 20 or more employees, the company plan stays primary over Medicare, reducing your out‑of‑pocket liability.
  • Max out a Health Savings Account while you’re still eligible. For 2026, you can contribute up to $4,400 (individual) or $8,750 (family) into an account that grows tax‑free and can be used for any qualified medical expense in retirement. The money never expires, and after age 65 it can even be used for non‑medical costs (though then taxable), making it a de facto supplementary retirement account.
  • Buy long‑term care insurance before your mid‑60s. Premiums are lower and acceptance rates higher if you apply in your 50s or early 60s. Financial advisors report clients being denied coverage even when they appeared healthy in their 70s. A hybrid policy that bundles a death benefit with long‑term care benefits can protect both your assets and your family.
  • Choose your Medicare path based on your health profile. Run a detailed comparison: traditional Medicare with a Medigap Plan G (average $1,440–$3,000 in annual premiums) plus Part D versus a Medicare Advantage plan. Healthier retirees typically save more with Medicare Advantage, while those with higher medical needs may find traditional coverage more cost‑effective despite the premium.
  • Model IRMAA before any Roth conversion. The surcharge is calculated on income from two years prior, so a large Roth conversion in 2026 could inflate your 2028 Medicare Part B and Part D premiums by thousands of dollars. Use a planner or online calculator to see whether the lifetime tax benefit of the conversion outweighs the immediate IRMAA hit.