Retiring at 65 With $1.3 Million Means Navigating an $8,400 Annual Healthcare Gap Most Plans Miss

Healthcare costs can quietly undermine retirement plans by taking a meaningful share of withdrawals. Using the 4% rule, a $1.3 million nest egg yields about $52,000 per year, and roughly $8,400 may be lost to healthcare costs not covered by Medicare. For a 65-year-old enrolling in Medicare at the start of 2026, Medicare Part B premiums total about $2,434.80 annually, Medigap Plan G averages about $2,580 annually, and Part D averages about $600 annually. Additional out-of-pocket costs plus dental and vision add about $2,800 annually, producing an estimated total around $8,400. Healthcare inflation has stayed above goods inflation, and broader economic conditions show weaker savings and sentiment, increasing the risk that healthcare costs rise further and force higher withdrawal rates.

"Pull $52,000 a year from a $1.3 million nest egg using the standard 4% rule, and roughly $8,400 of that could disappear into healthcare costs Medicare does not cover. That leaves $43,600 for housing, food, transportation, travel, and everything else, which sits below median household spending for retirees on a national basis."

"Medicare Part B standard premium: $202.90 per month, or $2,434.80 per year Medigap Plan G, averaged across most states: about $215 per month, or $2,580 per year Part D drug coverage at a typical mid-tier plan: roughly $50 per month, or $600 per year Out-of-pocket costs not covered by Plan G plus dental and vision: around $2,800 per year, per Fidelity's Retiree Healthcare Cost Estimate That adds up to a total annual healthcare bill around $8,400."

"Expect these numbers to only go higher over time. Services inflation, the bucket that includes healthcare, ran 3.4% year-over-year in March 2026 and stayed above 3.3% for months, consistently outrunning goods inflation. National healthcare personal consumption expenditures (PCE) have climbed from $3,432.2 billion in January 2025 to $3,741.3 billion in March 2026."

"Clearly, it's important to lock down the healthcare cost structure so the $8,400 line item does not creep toward $10,000 or $12,000 within a few years. That could force a higher withdrawal rate that drains the portfolio early."

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