Medicare is a starting point, not the whole plan. Premiums, IRMAA surcharges, and long-term care can add up to six figures over a retirement. Here’s how to build healthcare into your plan before you retire.
By The Galecki Financial Management Team
Most people heading into retirement assume Medicare has them covered. It’s an easy assumption to make. You paid into the system for decades, and at 65 the coverage finally kicks in. So why worry?
What surprises a lot of our clients in Fort Wayne and throughout Northeast Indiana is that Medicare was never designed to cover everything. It leaves legitimate gaps, and those gaps can add up to one of the largest expenses you face in retirement. 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 on healthcare and medical expenses over the course of retirement. That figure is up 4 percent from the year before, and it doesn’t include long-term care.
Planning around that number is a smart move.
Let’s walk through what Medicare covers, where the gaps are, and how to build healthcare into your retirement plan before you stop working.
What Medicare Does and Doesn’t Cover
Original Medicare comes in two main parts: Part A covers hospital stays, and Part B covers doctor visits and outpatient care. Part D, which you add separately, covers prescription drugs. Together they handle a significant share of your medical needs, but they were never meant to be a complete package.
Traditional Medicare has no annual out-of-pocket maximum. There’s no ceiling that caps what you might spend in a bad year. It also leaves out several things people assume are included: routine dental care, most vision and hearing needs, eyeglasses, and hearing aids. And it does not cover long-term care, which is the single largest healthcare risk many retirees face.
This is why so many retirees add a Medigap (supplemental) policy or choose a Medicare Advantage plan, along with Part D drug coverage. Each of those choices carries its own premiums, and those premiums are only the beginning of the story.
Premiums Are Just the Starting Point
The standard Part B premium in 2026 is $202.90 per month. That’s the baseline. What catches many higher-income retirees off guard is the Income-Related Monthly Adjustment Amount, better known as IRMAA.
IRMAA is a surcharge added to your Part B and Part D premiums once your income crosses certain thresholds. In 2026, those surcharges begin at $109,000 in modified adjusted gross income for a single filer and $218,000 for a married couple filing jointly. Cross the line, and your monthly cost jumps. At the top tier, the Part B premium climbs to $689.90 a month, with an additional Part D surcharge of up to $91 a month on top of that.
Two details make IRMAA especially tricky. First, it’s a cliff, not a slope. Going even $1 over a threshold can trigger the full surcharge for that tier. Second, it looks back two years. Your 2026 surcharge is based on the income reported on your 2024 tax return. That two-year lookback is exactly why healthcare planning and tax planning belong in the same conversation. A large Roth conversion, a property sale, or a poorly timed withdrawal can gradually push you into a higher bracket two years down the road. We wrote more about that connection in “How Tax Season Reveals Gaps in Your Retirement Plan.”
The Long-Term Care Gap
If premiums and IRMAA are the costs people underestimate, long-term care is the one they overlook entirely. Medicare covers only short, limited stints of skilled care after a hospital stay. It does not cover extended custodial care, the day-to-day help with bathing, dressing, and meals that many people need later in life.
The costs here are substantial. The national median cost of a private room in a nursing home runs about $133,462 a year, assisted living about $76,632 a year. For a couple, or for a stay that lasts several years, those figures can reshape an entire retirement plan.
You have a few ways to prepare for this risk. Some clients set aside a dedicated portion of their portfolio to self-fund care. Others explore long-term care insurance or hybrid life insurance policies that include a care feature. There’s no single right answer, and the appropriate path depends on your health, your family history, your assets, and your comfort with the trade-offs. The point is to make the decision deliberately rather than assuming Medicare has it handled.
How to Build Healthcare Into Your Retirement Plan
Planning for healthcare doesn’t have to feel overwhelming. A few moves, made early, can put you in a far stronger position.
If you’re still working and have access to a high-deductible health plan, a health savings account (HSA) is one of the most tax-efficient tools available. Contributions go in pre-tax, grow tax-free, and come out tax-free when used for qualified medical expenses. After age 65, you can also withdraw HSA funds for non-medical needs without penalty, paying only ordinary income tax, which makes it a flexible retirement resource. Pairing an HSA with your other savings, like the new 401(k) catch-up rules we’ve previously discussed, can strengthen the accounts you’ll lean on later.
Managing your income streams matters just as much. Because IRMAA looks back two years, the timing of Roth conversions, required minimum distributions, and large withdrawals can affect your Medicare premiums well into the future. Coordinating those decisions is one of the areas where a Fee-Only advisor can add real value, because our only compensation comes from you, not from any product we might recommend.
Finally, build a realistic healthcare line item into your retirement budget from the start. Treating healthcare as its own category, rather than folding it into a vague estimate, gives you a clearer picture of what your retirement can actually support.
At Galecki Financial Management, we help families in Fort Wayne and across Northeast Indiana map out these decisions as part of a comprehensive plan. As Fee-Only financial advisors in Fort Wayne, Indiana, we’re able to look at your full picture, healthcare included, and offer objective guidance with fewer conflicts of interest.
Ready to Plan for Healthcare in Retirement?
Healthcare may be the biggest expense you haven’t fully planned for, but it doesn’t have to catch you by surprise. To schedule a meeting, call (260) 436-8525 or email [email protected]. We’d be glad to help you build a plan that accounts for the full cost of your retirement, healthcare and all.
Frequently Asked Questions
Does Medicare cover long-term care?
No. Medicare covers only short, limited periods of skilled care following a qualifying hospital stay. It does not cover extended custodial care, such as ongoing help with daily activities in a nursing home or at home. Those costs need to be planned for separately.
What is IRMAA, and how can it affect my Medicare premiums?
IRMAA is a surcharge added to your Medicare Part B and Part D premiums when your income exceeds certain thresholds. In 2026, it begins at $109,000 for single filers and $218,000 for married couples filing jointly. Because it’s based on your income from two years earlier, decisions like Roth conversions and large withdrawals can affect what you pay later.
How much should I budget for healthcare in retirement?
65-year-olds may spend an average of $172,500 on healthcare over retirement, not including long-term care. Your own number depends on your health, coverage choices, and income. Building a dedicated healthcare line into your retirement budget is a helpful starting point.
Can a Fee-Only advisor help with healthcare planning?
Yes. A Fee-Only advisor can coordinate your income, tax, and coverage decisions so that healthcare fits into your broader retirement plan. Because Fee-Only advisors are compensated only for their time, their guidance carries fewer conflicts of interest.
About Galecki Financial Management
At Galecki Financial Management, we help individuals and families confidently pursue their financial goals. We’re anything but a business-as-usual wealth management firm. We’re different. Friendly. Casual. And really good listeners. Indeed, that’s a big part of what makes us different. Everything we do is based on what we hear from you, because our experienced team of professionals specializes in comprehensive financial planning, cash flow analysis, IRA rollovers, financial services, money management, estate planning, retirement planning, and advising. We help you identify your short- and long-term goals, and then we work together to pursue them. Lastly, and most importantly, we’re Fee-Only, meaning we’re only compensated for our time. Our only incentive is to help you succeed.