38% of Retirees Say Health Care Costs More Than Expected. What a 65-Year-Old Should Plan to Spend Instead

Medicare can feel like a financial backstop until the bills start arriving, and many new retirees do not realize where the gaps are until after they leave work. A look at what a 65-year-old is likely to pay in 2026 shows a figure that can still catch people off guard.

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Many people reach 65 assuming Medicare will take care of their health costs. That is an understandable assumption, but it is also where retirement budgets often come up short. In the EBRI and Greenwald 2025 Retirement Confidence Survey, 40% of retirees as of April 2026 said their health care expenses were higher than expected. For someone turning 65, the question is what to budget for in 2026: Medicare premiums, services it does not fully cover, and a sample annual health-care budget under two common coverage choices.

Medicare Charges That Begin Before Full Coverage

Part B pays for doctor visits and outpatient services. In 2026, the standard monthly premium is $202.90, up from $185 the prior year. Beneficiaries also face a $283 deductible, which must be paid each year before Part B begins paying its share. CMS says the increase is mainly tied to expected price changes and higher use of services.

Part A covers hospital care, and roughly 99% of beneficiaries do not pay a premium for it. Even so, hospital stays are not free. The deductible is $1,736 per benefit period, and stays longer than 60 days add $434 per day.

Extra Charges Higher-Income Retirees May Face

People with higher incomes pay more than the standard premium. Medicare refers to this as an income-related monthly adjustment amount, and it applies above modified adjusted gross income of $109,000 for single filers or $218,000 for joint filers. At the first tier, the Part B premium rises to $284.10. At the highest tier, it reaches $689.90.

Prescription drug coverage comes with its own added charge, ranging from $14.50 to $91 a month on top of the plan premium. CMS says about 8% of Medicare beneficiaries pay these additional amounts.

Prescription Costs Now Have a Cap

Part D plans cover prescriptions, and premiums differ from one plan to another. CMS uses a base beneficiary premium of $38.99 for 2026 as a benchmark. Enrollees also face an annual out-of-pocket limit for covered drugs. That cap is $2,100 in 2026 and rises to $2,400 in 2027.

Coverage Gaps That Surprise New Retirees

Original Medicare does not include an annual cap on out-of-pocket costs. Because of that, many people buy supplemental insurance, also known as Medigap. Medicare Advantage plans do have a limit. According to KFF, the in-network maximum cannot exceed $9,250 in 2026. Neither option covers everything. Medicare.gov lists long-term care and most dental services among the items it excludes, while Original Medicare generally also leaves out routine vision care and hearing aids.

Two Sample Budgets for Someone Age 65

Both sample budgets use the standard Part B premium and assume no income surcharge. The supplement policy is priced at $200 a month. Boomer Benefits says supplement premiums can range from $70 to more than $300 monthly, so that figure sits in the middle of the range. Drug coverage is priced at the CMS base premium. Each budget also sets aside $2,000 for dental, vision, and hearing expenses.

The Medicare Advantage budget assumes no extra premium, since KFF reports that 75% of Advantage enrollees in individual plans with drug coverage pay nothing beyond Part B. It also includes $3,000 for copays.

In a typical year, the two approaches are very close. The difference becomes clearer in a costly year. If the Original Medicare enrollee reaches the drug cap, the total climbs to $9,686. If the Medicare Advantage enrollee reaches the in-network limit, the total rises to $13,685, and that is before drug costs, which are counted under the separate Part D cap. For context, the average retired worker’s monthly Social Security benefit is $2,071 after the 2026 cost-of-living increase.

Ways Retirees Can Reduce the Cost

A health savings account, or HSA, is usually funded before Medicare begins. Contributions are tax-deductible, and withdrawals for qualified medical expenses are not taxed. After age 65, the account can be used to pay Medicare premiums, but the IRS does not allow it to pay Medigap premiums. Contributions must stop once Medicare coverage starts.

Coverage also changes from year to year, and AARP says those changes are contributing to a busy open enrollment period. The timing of income matters too. Because the surcharges are based on modified adjusted gross income, a large IRA withdrawal or a major capital gain can move someone above the $109,000 threshold.

The Annual Window That Resets Health Planning

Medicare open enrollment runs from October 15 through December 7 each year, with new coverage taking effect on January 1. The current window is open for 2027 plans. That period allows shoppers to compare premiums, drug formularies, and out-of-pocket limits side by side, and October 15 is when the next year’s figures become available.