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Mike Ballew – Engineer, author, and Eggstack founder.
Eggstack is an independent financial technology company located in Jacksonville, Florida. Our mission is to help you overcome uncertainty about retirement planning and inspire confidence in your financial future.
PRIVACY POLICY
A good understanding of Medicare is needed in order to plan for retirement healthcare costs. Medicare premiums, copays, and deductibles consume the majority of the typical retirement healthcare budget.
The first step in planning for retirement healthcare costs is to identify the coverage you need. Medicare Part A covers hospitalization and the premiums are free*. Prepaid would be a better description. You pay into Medicare your entire working life by way of payroll withholdings.
Medicare Part A covers in-patient care in a regular hospital, psychiatric hospital, skilled nursing facility, hospice, or in-home care. In terms of planning for retirement healthcare costs, the primary consideration is the deductible. The Medicare Part A annual deductible for 2025 is $1,600 per person. All other Medicare parts are optional and they aren’t free.
Medicare Part B is basic medical coverage including doctor visits, outpatient services, medical equipment, and ambulance services. The monthly premium is $165 and the annual deductable is $226 (all figures per person). For retirees with an annual adjusted gross income greater than $97,000, the premiums are significantly higher. The table below shows the 2025 Medicare Part B monthly premiums for each income level. For those filing joint returns, the income brackets double.
| INCOME | PREMIUM |
|---|---|
| $97,000 and less | $165 |
| $97,001 - $123,000 | $231 |
| $123,001 - $153,000 | $330 |
| $153,001 - $183,000 | $429 |
| $183,001 - $500,000 | $528 |
| More than $500,000 | $561 |
Medicare Part C, also known as Medicare Advantage, limits maximum out-of-pocket costs. It prevents you from being potentially exposed to thousands of dollars in medical expenses in the event extensive medical care is needed. Medicare Part C is not provided by Medicare, it’s a private insurance product. Premiums vary by provider but the average for 2025 is $33 per month.
Medicare Part D covers drug-related costs such as prescription medications. Monthly premiums are based on your income and different plans are available. The average Medicare Part D annual deductible for 2025 is $340 or $28 per month. The table below lists the average 2025 Medicare Part D monthly premiums by income. The income amounts are double for couples filing joint tax returns.
| INCOME | PREMIUM |
|---|---|
| $97,000 and less | $32 |
| $97,001 - $123,000 | $44 |
| $123,001 - $153,000 | $64 |
| $153,001 - $183,000 | $83 |
| $183,001 - $500,000 | $102 |
| More than $500,000 | $108 |
Medicare Supplement, also known as Medigap, serves the same purpose as Medicare Part C, to limit out-of-pocket costs. Medicare Supplement is also a private insurance product. You must have Medicare Parts A & B to be eligible for Medicare Part C or Medicare Supplement. You cannot have both Medicare Part C and Medicare Supplement.
If you are in good health with few chronic medical conditions, you may find Medicare Part C to be the best choice for you. The premiums for Medicare Part C are less than Medicare Supplement. Conversely, if your health is such that you expect to incur significant medical costs, you will be better off going with Medicare Supplement. Medicare Supplement provides better coverage than Medicare Part C.
There are several Medicare Supplement plans to choose from with different levels of coverage. Monthly premiums range from approximately $100 to $300 depending on the plan you choose.
When choosing between Medicare Part C and Medicare Supplement, the conservative approach is to take Medicare Supplement. The most popular Medicare Supplement plan is Plan G. In 2025 the average monthly premium for Medicare Supplement Plan G is $160.
Deductibles must also be considered when planning for retirement healthcare costs. For a person in reasonably good health, Medicare Part A will not come into play every year. A conservative assumption is that the annual deductible will be maxed out once every 4 years. $1,600 divided by 4 is $400 per year or $33 per month.
The annual deductible for Medicare Part B is $226 or $19 per month. It is not unreasonable to expect that you will max that out every year. Same goes for the Medicare Part D deductible which for 2025 the average amount is $340 or $28 per month. Putting it all together, this is the total monthly budget for retirement healthcare costs based on adjusted gross retirement income of $97,000 or less and the assumptions outlined above:
| ITEM | AMOUNT |
|---|---|
| Medicare Part A Premiums | $0 |
| Medicare Part A Deductibles | $33 |
| Medicare Part B Premiums | $165 |
| Medicare Part B Deductibles | $19 |
| Medicare Part D Premiums | $32 |
| Medicare Part D Deductibles | $28 |
| Medicare Supplement Premiums | $160 |
| TOTAL | $437 |
Rounding to $440, this says a single person needs to budget $5,280 per year for retirement healthcare costs and couples need to plan on $10,560 per year. Those with incomes greater than $97,000 will need to budget for more.
* For 99% of Medicare enrollees.
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Engineer, author, and Eggstack founder.
