Most people who are serious about retirement have done the spreadsheet. They’ve tracked their savings rate, maxed their 401(k), maybe even consulted a financial advisor. They know roughly what they’ll spend on housing. They know where they’ll live. They feel, in a reasonable and justified way, prepared.
And then retirement actually arrives – and three specific costs start pulling at the plan in ways nobody warned them about clearly enough.
This isn’t about irresponsible retirees who forgot to save. It’s about costs that are systematically underestimated even by people who did everything right. About 54% of retirees say they were surprised by how much it costs to retire – and that’s not a fringe group. These are people who spent decades preparing. The costs outlined below are the ones most responsible for that gap between what retirement was supposed to look like and what it actually does.
1. The Healthcare Bill Medicare Doesn’t Tell You About
Medicare feels like the finish line. You turn 65, you enroll, and you assume the coverage question is largely settled. That assumption is one of the most expensive ones a retiree can make.
The average 65-year-old retiring in 2025 will spend $172,500 on healthcare and medical treatment through the rest of their life, according to a 2025 Fidelity Investments study. That number lands hard enough on its own. But it doesn’t include long-term care, most over-the-counter medications, or the three categories of routine care that Medicare simply doesn’t cover: dental, vision, and hearing.
In 2025, Original Medicare still excludes routine dental care, eye exams, glasses, and hearing aids, leaving many retirees with large out-of-pocket bills. These aren’t fringe items. These are services most people use every year. With the average cost of a dental crown running between $800 to $2,500 and dental implants costing several thousand dollars per tooth, skipping dental insurance during your senior years can mean big out-of-pocket bills. And hearing aids, which become relevant for a significant share of people over 70, are even steeper – Medicare doesn’t cover hearing exams or the devices themselves, and the average price of hearing aids ranges from $2,000 to $7,000 per pair.
While overall inflation has hovered between 2% and 3% in recent years, home insurance rates surged 11% in 2023 and 11.4% in 2024, and federal data shows motor vehicle insurance premiums have risen at double or triple the overall inflation rate for most of 2025. Healthcare costs are rising in the same direction: health care costs rose 3.9% for the 12 months ending September 2025, compared to 3% for products and services generally. That spread matters over a 20- or 30-year retirement because it compounds. Each year, the gap between what you budgeted and what healthcare actually costs widens slightly – and by year 15, it’s a meaningful problem.
The practical move here is to treat dental, vision, and hearing as separate budget line items from day one of retirement, not as occasional surprises. Medicare Advantage bundles medical and extra benefits into one plan but limits your provider choice to a local network, while Original Medicare paired with a Medigap supplement plan helps pay for deductibles and coinsurance through broader provider access. Neither path is perfect, and the right choice depends entirely on your health picture and geography. The point is to make that choice actively, before you’re holding a dental bill you didn’t plan for.
2. Long-Term Care: The Cost Most Retirement Plans Leave Out Entirely
Ask someone what they’ve budgeted for long-term care in retirement and most will give you a version of the same answer: they haven’t. The combination of “I’m healthy” and “Medicare will cover it if I need it” does a lot of damage here.
According to research from the U.S. Department of Health and Human Services, more than half of adults develop serious disabilities after they reach age 65 and use some paid long-term services and supports, such as home care or nursing home care. Yet many people have no plan for how they would pay for that care, often mistakenly believing Medicare will cover the costs, which it generally does not. This is a majority of retirees walking into one of their largest potential expenses with no plan.
In 2024, the national annual median cost of a semi-private room in a skilled nursing center rose to $111,325, a 7% increase from the previous year, while a private room jumped 9% to $127,750. That’s a full year’s worth of expenses for many households – and it’s the median, meaning half of all facilities charge more. A home health aide, which most people prefer to a nursing home when they can, isn’t much cheaper: the median overall cost of home health services in the United States was $80,080 in 2025, while the median overall cost of nursing home services was $122,275.
The 2025 Milliman Long-Term Care Index puts the figure at $135,000 – the projected average amount a 65-year-old would need to set aside today to cover expected future lifetime costs of long-term care, assuming commercial market-rate payments. That average breaks down to roughly $98,000 for men and $171,000 for women, because women tend to live longer and are more likely to need extended care. Roughly 1 in 5 Americans turning 65 will face more than $200,000 in long-term care costs, and almost 1 in 4 older adults who receive long-term care pay for it for more than two years.
For those wondering about long-term care insurance as a solution: it exists, and buying it younger makes it significantly more affordable. In 2025, the average annual long-term care insurance premium was $2,200 for a 55-year-old male and $3,750 for a 55-year-old female. Wait until 65, and those premiums climb steeply. The other option gaining traction is hybrid life insurance or annuity products that bundle long-term care benefits into a single policy, which can be useful for people who resist paying premiums for coverage they may never use. Neither is cheap. Neither is as expensive as needing care with no plan.
For couples specifically, the unpaid care piece is worth thinking about clearly. Unpaid caregivers provide most long-term care in the United States, delivering support valued at an estimated $600 billion in 2021, and many spouses, adult children and other family caregivers reduce work hours or leave jobs entirely, often sacrificing their own income, savings, and retirement security. If your long-term care plan is “my spouse will handle it,” that plan has costs too, even if they don’t show up on a financial spreadsheet.
3. The Retirement Tax Bill That Builds Quietly, Then Hits All at Once
The working assumption for most people is that taxes get simpler and cheaper once the paycheck stops. It’s a reasonable assumption. It is also frequently wrong.
Taxes in retirement are often more complicated than many people expect, particularly when Social Security, required minimum distributions (RMDs), and Medicare premiums begin interacting at the same time. The part that catches most people off guard is an interaction that financial planners have started calling the “tax torpedo.” The tax torpedo occurs when a withdrawal from an IRA or an RMD triggers a domino effect that causes more of your Social Security benefits to become taxable. As income rises, each additional dollar withdrawn from a retirement account may not only be taxed as ordinary income but may also pull additional Social Security income into the taxable column.
The IRS thresholds driving this are the problem. For individuals with combined income between $25,000 and $34,000 (or $32,000 to $44,000 for married couples), up to 50% of Social Security benefits may be taxable. For individuals with combined income above $34,000 (or $44,000 for couples), up to 85% of benefits may be taxable. Critically, these thresholds are not indexed for inflation, meaning more retirees are pulled into them every year. Those numbers were set in 1984. Forty-plus years of COLA increases and account growth have quietly pushed a large share of middle-class retirees into brackets that were originally intended only for high earners.
The RMD side of the equation compounds this further. According to Kiplinger’s 2026 guide to retirement tax traps, starting at age 73, retirees must take required minimum distributions from traditional IRAs and 401(k)s, and missing an RMD or withdrawing the wrong amount can trigger a penalty of up to 25%. But the tax bill from taking the RMD is often the bigger issue. Retirees who delay their first RMD until April 1 may find themselves taking two RMDs in the same year, which can raise taxable income sharply and affect Medicare premiums. That last part – Medicare premiums – is its own surprise. High earners on Medicare face income-related surcharges, known as IRMAA (Income-Related Monthly Adjustment Amount), which the IRS calculates based on income from two years prior. Sell an investment, do a large Roth conversion, or take a one-time distribution and two years later your Medicare premiums spike – often long after you’ve forgotten what caused it.
The window to address this is the years between retirement and age 73, when RMDs begin. That gap – sometimes seven or eight years – is when strategic Roth conversions are most powerful. You pay tax in lower brackets now to avoid being forced into higher ones later. Qualified charitable distributions, available starting at age 70½, allow IRA money to go directly to a charity, count toward the RMD requirement, and never enter adjusted gross income. The 2026 limit is $111,000 per person. For retirees who already give to charity regularly, this is one of the cleanest tools available for keeping combined income under the Social Security thresholds.
If you’re currently building savings and want to understand how different account structures can change your tax picture in retirement, the strategies outlined in 35 Money Milestones You Should Hit for Retirement at Every Age are worth reading alongside your long-term planning.
Read More: Retirees are raving about charming town so affordable that social security is all they need
The Thing Worth Sitting With
None of these three costs are obscure. Healthcare inflation is in the news. Long-term care statistics come up in every retirement planning conversation. Tax traps for retirees have been written about for years. And yet a 2024 retirement statistics analysis found that more than half of all retirees were surprised by the actual cost of retirement – despite having prepared.
That gap between knowledge and planning is partly because these costs feel distant and hypothetical until they’re not. A hearing aid bill at 72 doesn’t feel like something to budget for at 55. A tax torpedo doesn’t feel like a real concern when you’re still two decades from your first RMD. Long-term care feels like something to deal with later. Later has a way of becoming now faster than anyone expects.
The honest position isn’t that you need to have all of this figured out perfectly. It’s that the plan you built in your 50s probably needs a deliberate review of these three areas specifically – not because something went wrong, but because they are the categories retirement planning most reliably underestimates. Running the numbers now, adjusting account strategies while there’s still time to matter, and looking at supplemental insurance options before you need them are all still meaningful moves. Even a partial hedge against a $170,000 healthcare bill or a six-figure long-term care need changes the math significantly. That kind of preparation isn’t pessimistic. It’s what “well-prepared” actually looks like.
AI Disclaimer: This article was created with the assistance of AI tools and reviewed by a human editor.