The Longevity Paradox: Increased Health Care Costs

At age 65, the average American can expect to live another 20 years.¹ However, those with significant wealth can expect to live almost a decade beyond that.²

But there's a paradox lurking within these record lifespans.

While good health may buy you more time and a higher quality of life in your later years, it can also bring greater health care costs in retirement. That's because living longer not only extends the amount of time you'll need to pay for routine health care but also increases your risk of chronic disease.

"This longevity premium means savers need to start treating health care expenses not merely as a line item in their retirement budgets but rather as one of the central goals of their planning," says Joseph Reyes, CFP^®, CWS^®, CTFA, AAMS^®, a senior financial planner at Schwab.

Here's what health care could cost you—and how to plan for it.

The total cost of premiums and out-of-pocket health care expenses for a healthy retiree currently averages around $273,000 per person,³ assuming 23 years of expenses beginning at age 65. Of course, estimates vary based on your health, plan selection, and income; however, higher income combined with a longer lifespan could drive up such costs considerably—particularly where Medicare is concerned.

For example, while Medicare Part A—which covers inpatient hospital and even hospice care—is premium-free for most participants, you'll still pay out of pocket to actually use the coverage. Costs are calculated per benefit period, which begins the day you're admitted to a facility and ends when you haven't received inpatient care for 60 consecutive days. In 2026, the costs for each benefit period include:

• A one-time deductible of $1,736, then $0 for days 1–60.
• A coinsurance of $434 per day for days 61–90.

Care extending beyond 90 days costs $868 per day and counts against your 60 lifetime reserve days. Once your reserve days are depleted, you are responsible for all inpatient expenses lasting longer than 90 days.

Meanwhile, premiums for Medicare Part B—which covers outpatient services like annual screenings, basic medical equipment, and routine doctor visits—are determined by your income two years prior to the benefit year.

Premiums for Medicare Part B are determined by your modified adjusted gross income (MAGI) two years prior to the benefit year.

With increased longevity comes a greater likelihood of needing some type of long-term care during your lifetime. That's especially true for women, who generally live longer than men.⁵

Around 70% of today's 65-year-olds will eventually require help with daily activities such as bathing, dressing, and eating.⁶ "While many assume they'll be able to depend on family members for care, the emotional burden on caregivers can be heavy," Joseph says.

The alternative is to hire professional help, but such care is expensive—with median costs in 2026 estimated at nearly $6,250 a month for a nonmedical caregiver working 40 hours a week.⁷ Meanwhile, intensive, around-the-clock care can be crippling for all but the most substantial estates. For example, the median cost in 2026 for a private room in a nursing home is expected to be $11,122 a month⁸—meaning an average long-term stay of three years⁹ can exceed $400,000.

For those who have access to a health savings account (HSA) through a high-deductible health plan, this can be a crucial addition to their health care expense planning.

Although not technically considered a retirement account, an HSA can be an effective savings vehicle for three reasons:

• Contributions reduce your taxable income up to $4,400 for self-only coverage and $8,750 for family coverage in 2026, with an additional $1,000 catch-up contribution allowed for those ages 55 and older.
• Investments grow tax-free.
• You pay no tax on withdrawals used for qualified medical expenses. (Once you reach age 65, withdrawals made for nonmedical purposes will be taxed as ordinary income.)

Notably, such qualified expenses include premiums for Medicare Parts B and D, as well as Medicare Advantage. (Medigap premiums do not qualify.) You can also use the account to pay for long-term care insurance premiums.

HSAs are also exempt from the required minimum distributions (RMDs) from tax-advantaged savings accounts mandated by the IRS beginning at age 73 or 75, depending on your birth year.

"The math here is powerful," Joseph says. "And any money left behind in your HSA can be handed down to your beneficiaries."

Another tax-efficient strategy to help manage Medicare costs is to fund a Roth IRA—which, like HSAs, isn't subject to RMDs. Roth IRAs are particularly good at controlling the income that could otherwise bump you into a higher premium category.

If you're a high earner, you may not be able to contribute to a Roth IRA outright, but there are several ways to circumvent the income limits:

• Contribute to a Roth 401(k): Unlike individual Roth IRAs, Roth 401(k) plans do not have income restrictions. If your company offers this option, you can contribute after-tax dollars up to the annual limit regardless of how much you earn.
• Convert traditional IRA funds to a Roth IRA: Often called a "backdoor" Roth, this strategy involves contributing to a traditional IRA and then converting those funds to a Roth account, since there are no income limits on conversions. However, you'll owe income taxes on the amount converted.

"It's easy to feel powerless in the face of potential health care costs in retirement," Joseph says, "but the biggest mistake is not understanding your resources and how they best fit into your situation."