For Americans still in the workforce with employer-sponsored healthcare plans, it’s easy to take health insurance for granted. Unfortunately, this means that many middle-class workers fail to factor in health care costs when planning for their retirement. This oversight can have serious financial ramifications in their golden years.
According to Fidelity’s 2025 Retiree Health Care Cost Estimate, a 65-year-old retiring in 2025 can expect to spend an average of $172,500 throughout retirement on health care and medical expenses — and that’s excluding long-term care expenses. The same survey indicates that 20% of Americans never considered their healthcare needs during retirement.
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Peter Dunn, a financial expert, author and host of the “Pete the Planner Show” podcast and radio show, said workers are often blindsided by the cost of medical coverage because their take-home pay arrives after medical expenses are deducted.
“Workers are used to having a lot covered that just isn’t with Medicare,” he said, noting that retirees often fail to anticipate the costs Medicare premiums — the price of which can vary depending on their income –or the fact that dental, vision, hearing and prescription drug costs aren’t fully covered by most Medicare plans.
“Middle-class couples could easily spend $6,000 [to] $10,000 a year out of pocket,” he added.
That said, there are some ways pre-retirees can plan for and mitigate the impact of healthcare costs in retirement.
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Invest Early in Your Health
It may sound obvious, but the single best way to control retirement costs is to stay healthy, said Dunn.
“If your retirement is consumed with medical expenses, it will be absolutely miserable,” he added. “Don’t smoke, keep your weight under control, walk 10,000 steps a day. Those choices matter more than you realize.”
Even small improvements in fitness can reduce the risk of costly chronic illnesses like heart disease and diabetes.
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Pay Off Your Mortgage Before You Retire
“Middle-class retirement is very different today than it was 30 to 40 years ago,” Dunn said, noting that the demise of company pensions and the fact that people are buying homes later in life means many workers retire without a guaranteed income, and with the added burden of mortgage payments.
Entering retirement with a mortgage can put a huge strain on fixed income, especially when paired with rising healthcare costs.
“If you think your biggest expense is your mortgage, eliminating that before retirement can reduce your monthly expenses by as much as 30%,” the expert noted.
Don’t Sacrifice Your Retirement for College Tuition
Many middle-class parents feel pressure to cover their children’s higher education. But Dunn cautions against taking on student debt late in life.
“I don’t think a parent in the middle class should martyr the rest of their financial life to improve someone’s financial life who’s just starting their career,” he explained.
Trade schools or more affordable college options may make more sense depending on the student’s trajectory.
Invest in an HSA
For those with high-deductible health plans, an health savings account (HSA) can act like a “healthcare 401(k) [plan],” said Dunn. Contributions are tax-free, the money grows tax-free and withdrawals for qualified medical expenses are also tax-free.
“If you’re eligible, it’s an amazing strategy,” Dunn said. Still, he advises prioritizing retirement accounts first: “Invest in your 401(k) before your HSA. But if you’re maxing out your 401(k), an HSA should be your next stop.”
Retirement planning looks different for the middle class than for wealthier households. Most Americans won’t retire because they’ve saved a fortune, but because they’ve managed to lower their expenses.
“The middle class can’t always save more money,” Dunn said. “They have to reduce their cost of living. That’s what gives them a shot at a comfortable retirement.”
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This article originally appeared on GOBankingRates.com: The One Thing That Makes a Middle-Class Retirement 10 Times More Expensive, According to Experts
