Senior Couples Need $388k Saved for Health Care Costs: Milliman

A healthy 65-year-old couple entering retirement this year will need $388,000 in savings for future health care costs, according to Milliman Inc.’s 2025 Retiree Health Cost Index, which was released Tuesday.

The total includes coverage under Medicare Parts A and B, which cover hospital stays and medical visits, as well as Medigap Plan G, which covers out-of-pocket expenses, and Medicare Part D, which covers prescription drugs.

It breaks down to $185,000 in savings needed by a healthy 65-year-old man with a life expectancy of 88 and $203,000 in savings needed by a healthy 65-year-old woman with a life expectancy of 90.

This total decreased by $7,000 compared with 2024, but rose $17,000 since 2022. The largest shifts in cost since last year have been a 2% increase in estimated Medicare Part B premiums, a 2.5% decrease in projected future inflation and a 1.8% decrease in estimated Medicare Part D premiums.

For a healthy 65-year-old couple electing to purchase Medicare Advantage coverage, also known as Medicare Part C, which is private health insurance approved by Medicare; and Medicare Part D, the Milliman index estimates they need $183,000 in savings. The total number breaks into $87,000 needed by a man living to age 88 and $96,000 by a woman living to age 90.

That is a $1,000 increase from last year and a drop of $12,000 since 2022. Since last year, the largest shifts in cost have been a 2.5% increase in Medicare Part B premiums, a 1.2% increase in out-of-pocket expenses and a 2.6% decrease in projected future inflation.

According to Milliman, health care cost trends are impacted by price and utilization changes, projected future inflation and policy and regulatory changes such as 2022’s Inflation Reduction Act, which allowed Medicare to negotiate prescription drug prices.

“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.”

Not only do health status and lifespan expectancy impact premiums and out-of-pocket expenses, with costs increasing for those with worse health or longer lifespans, but retirement age and state of residence are also factors as well.

People 56% more for health care, compared with those who retire at 65 and sign up for Medicare Parts A, B and D and Medigap Plan G; and 90% more for health care than those who retire at 65 and enroll in Medicare Advantage and Part D, according to Milliman.

Likewise, those who retire at age 70 rather than 65 pay 29% less for both Medicare options.

Looking at cost variation between states, Milliman found that Florida is the most expensive state for Medicare Parts A, B and D and Medigap Plan G and New Mexico is the least expensive. Maryland, Massachusetts, Minnesota and New York are the most expensive states for Medicare Advantage and Part D and Florida and Nevada are least expensive.

Milliman says its projections of long-term spending costs are based on extensive research, but small variations could lead to wide differences in spending. If spending costs rise an additional 1% per year, total health care costs in retirement could increase by about 15%, and an annual decrease of 1% could lower overall costs by about 13%.

Analysis by T. Rowe Price found that the largest health care expense for most seniors is Medicare premiums, which for most people are deducted from Social Security benefits. They also recommended financial advisers approach health care as one category in a retiree’s monthly budget, rather than a lifetime lump sum.