Here's how much employees need to save for healthcare in retirement

• Key Insight: Learn how retiree healthcare choices (Medigap vs Medicare Advantage) reshape retirement funding needs.
• What's at Stake: Underestimating healthcare costs could undermine employer retirement readiness programs and workforce retention.
• Forward Look: Expect rising Medigap and Part B premiums to reshape employer benefit strategy.
• Source: Bullets generated by AI with editorial review

Healthcare in retirement isn't just a line item — it's one of the biggest financial risks employees face.

Helping employees prepare for retirement has always been a critical part of a benefits strategy, but new data from Milliman underscores just how significant healthcare costs will be in shaping retirement readiness. The 2025 Milliman Retiree Health Cost Index (RHCI) calculates what today's retirees can expect to spend on healthcare, providing benchmarks that benefit managers can use to educate and guide their workforce.

According to the RHCI, a healthy 65-year-old retiring in 2025 will need substantial savings set aside for medical costs. Under Medigap, men should plan for $185,000 and women $203,000 in lifetime savings. Those who choose Medicare Advantage will need less — $87,000 for men and $96,000 for women. 

Read more: Women lean harder on Social Security. Here's what that means for retirement strategies

For couples, the differences are even more striking: $388,000 in savings needed for Medigap compared with $183,000 for Medicare Advantage. These figures assume average life expectancies of 88 years for men and 90 for women, but costs can rise dramatically with longer lifespans, poorer health or earlier retirement. For example, five extra years of life adds more than 40% to total healthcare spending.

"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. "Understanding what these costs are and how they can change year-to-year is key for both consumers and employers."

Retirement timing plays a key role in healthcare costs

For employers and benefit leaders, the RHCI reinforces an often-overlooked reality: Healthcare is one of the most significant and unpredictable expenses in retirement, and underestimating it can derail even well-planned savings strategies. Employees may assume Medicare covers most medical needs, without realizing the ongoing costs of premiums, prescription drugs, out-of-pocket expenses, and supplemental coverage. Without education and planning, workers risk being underprepared at the very stage when healthcare needs are likely to increase.

Medigap premiums and Medicare Part B expenses continue to climb, and retirement timing also plays a major role, with costs increasing by as much as 90% for those who retire at 60, while delaying to 70 reduces costs by nearly a third. Health status and geography further impact outcomes, according to the index.  

Benefit managers have a unique opportunity to integrate healthcare planning into retirement readiness programs. This can include providing access to financial wellness tools that allow employees to model how healthcare costs might change based on retirement age, health status, or geographic location. Offering retirement healthcare cost calculators can help employees see the real numbers they'll need to consider. 

Read more about retirement resources to help employees prepare for healthcare costs: 

• Benefits to help employees plan for life after work
• How Gen Z is redefining retirement strategies
• Navigating retirement insecurity with the right workplace benefits