4 ways seniors can prepare for surprise medical costs, according to experts

Rising medical expenses, longer life spans and gaps in Medicare coverage are leaving many retirees exposed to expensive medical costs they hadn’t planned on. 

If you’re 65 and planning to retire this year, for example, you can plan on paying an average of $172,500 in healthcare and medical expenses throughout retirement, according to Fidelity’s 2025 Retiree Health Care Cost Estimate. Those costs can be substantially higher if long-term care is ever needed. 

The report shows that 20% of Americans admit they never considered health care costs during retirement. And many seniors mistakenly believe Medicare will cover most of their medical bills. While traditional Medicare will cover a large chunk of your healthcare costs, it typically doesn’t cover long-term care (LTC), physical checkups, eye exams, dental care and hearing aids and other health services. If you’re not ready for it, these are the types of unplanned medical costs that can strain your finances in retirement.

How can seniors prepare for surprise medical costs? We asked experts to weigh in with their advice.

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4 ways seniors can prepare for surprise medical costs

Here are four effective ways in which seniors can prepare for surprise medical expenses, according to the experts we spoke with:

Understand your Medicare coverage

Preparing for surprise costs starts with learning what your Medicare does and doesn’t cover. Traditional Medicare covers hospital stays and doctor visits, but it has significant gaps that can catch retirees off guard.

“Many retirees are shocked to learn that Medicare does not cover dental, vision, hearing or long-term care,” says Gregory Guenther, co-founder and financial planner at GRANTvest Financial Group in Matawan, New Jersey. “I’ve had clients spend thousands on dental implants and hearing aids they assumed were covered.” He also notes that seniors can face large rehab or hospital coinsurance bills after just a few weeks.

Gaps like these can create major out-of-pocket surprises if you haven’t planned for them. Start your preparation by logging into Medicare.gov and reviewing exactly what your plan covers. Write down the gaps, such as dental, vision and prescriptions. Consider taking a look at your protections each year as coverages and costs may change. 

Learn how a Medicare supplemental plan can cover your needs here.

Build medical emergency funds

One unexpected hospitalization can wreak havoc on your monthly retirement budget. That’s where a dedicated medical emergency fund can help protect your finances in retirement. Trying to determine how much you should have stashed away, however, can be difficult.

“There’s no magic number, but I usually advise retirees to earmark a medical ‘shock absorber’ fund, ideally $5,000 to $10,000 set aside specifically for healthcare curveballs,” says Patrick Huey, principal advisor at Victory Independent Planning in Portland, Oregon. 

“If you’re not yet on Medicare, max out your HSA (Health Savings Account); it’s triple tax-free and rolls over into retirement. Once on Medicare, a high-yield savings account or money market keeps your medical fund accessible and ready. You need to be able to cover a major expense without tapping your living expenses,” Huey adds.

Review supplemental coverage

Supplemental coverage is a critical tool that can help you pay for costs that Medicare alone won’t cover. The two most common types of supplemental coverage are: 

• Medicare Supplement (also known as Medigap): Covers the gaps in Original Medicare coverage so you avoid unexpected bills in the first place. You choose your own doctor and keep your Medicare coverage intact.
• Medicare Advantage (also known as Part C): A private insurance plan that operates a network of providers in your area. Coverage varies by plan, but typically includes prescription drugs, dental and vision benefits and other costs not covered by Medicare.

Remember, however, that Medicare has no cap on out-of-pocket expenses, so your costs could be substantial. “For outpatient services, you pay 20% of all costs after your Part B deductible,” says Danielle Roberts, founding partner at Boomer Benefits in Fort Worth, Texas. “That 20% can become a staggering amount, which is why people often buy Medigap policies to cover that other 20% and additional deductibles and copays depending on the plan.”

Compare the top supplemental options available to you here.

Plan for long-term care costs

It’s also important to save for long-term care, which can include a nursing home, assisted living facility, or in-home care, which can potentially costs thousands of dollars each month. These are the sort of costs that could eat away at your next egg if you’re not prepared for them.

Roberts recommends working with financial advisors who can suggest life insurance with accelerated death benefits or annuities with long term care insurance riders to help fund your future care needs. “I worked with a long-term care (LTC) expert to enroll my own parents in coverage years ago. Buying LTC insurance early, ideally in your 40s or 50s, keeps premiums lower. We purchased a five-year plan with an inflation rider that lets them receive care at home if needed.”

The bottom line

October is an opportune time to review your current Medicare coverage because the Annual Enrollment Period (AEP) runs from now through December. Remember, policy options can change, so check to see if your plan still covers your preferred doctors and medications. Compare options during the open enrollment period to make sure you’re not overpaying and that you’re covered for what you need.

As you review your plan, consider the maximum amount you can pay out-of-pocket. Try to look ahead to any significant health costs you expect in the next year. If you know you’ll need expensive drugs or a procedure, choose a plan that has lower costs when you use it. It may be worth paying a higher premium if it saves you money in the long run.