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For many retirees, budgeting becomes an act of precision: cutting back on travel, downsizing homes and seeking out seniors’ discounts.

But there’s one expense that still manages to take a surprising toll, even for those who think they’ve planned their golden years well. And it’s one that some even think will be covered almost free of charge.

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That crucial retirement expense, according to financial expert Suze Orman (1), is healthcare — more specifically, the often misunderstood and underestimated costs of Medicare. In fact, the AARP reports that health care is the one that takes most older Americans by surprise, and it can set them back hundreds of thousands of dollars per year (2).

“Clearly, that’s a retirement expense you need to plan for,” she wrote in her blog. But Orman is not just thinking about retirees: “Even if you have yet to enroll in Medicare, I need you to listen up.”

So, if you’re interested in enjoying retirement stress-free, it will be a lot easier — and cheaper — if you take her advice. Here’s what to look out for and how to mitigate potential risks.

Many Americans assume that Medicare will cover most, if not all, of their medical needs after retirement. But Orman cautions that this is a dangerous belief.

And she isn’t alone. Speaking to the AARP, Tyler End, a certified financial planner and cofounder of Retirable, a retirement planning firm in New York, backs up Orman’s assertion. “Health care is the most unpredictable expense because Medicare doesn’t cover everything. Out-of-pocket costs, deductibles, prescription drugs and the potential need for long-term care add up” (2).

While Medicare Part A (hospital insurance) is generally premium-free, the 2026 inpatient hospital deductible is only $1,736 per stay (up from $1,676 in 2025) — and that’s just one example of unexpected out-of-pocket costs (3). To put this in perspective, the average cost of a one-day hospital stay was $3,297 in 2024, according to the Kaiser Family Foundation (4). Even worse, based on the latest CDC data (5), the full average adjusted cost was $14,101 per inpatient stay at community hospitals, which refers to any non-federal, short-term general and special hospitals.

If you do the math, that deductible only covers about half of the average cost of a one-day hospital stay, leaving older Americans with an extra $1,561 bill to pay. For many older Americans, these kinds of numbers could be devastating.

It’s also important to remember that with age, the likelihood of a hospital stay increases. In 2019, individuals between 65 and 74 had a 16.9% chance of one or more hospital stays, while those over the age of 85 had a 26.1% chance, according to a separate CDC report (6).

Plus, Original Medicare (Parts A and B) doesn’t cover essentials such as dental, vision and hearing. Orman’s key advice is to get a solid Medigap policy to fill in these blind spots.

“Anyone with Original Medicare should also have a robust Medigap policy,” Orman wrote in a blog post about Medicare Part B (medical insurance) in December 2024 (7). “It will cover that 20% you are on the hook for.”

While Medigap plans do require paying more in monthly premiums, Orman believes the tradeoff is worth it to protect against large, unpredictable medical bills. These policies can help with costs like coinsurance, copayments, deductibles and additional hospital and health care expenses.

According to Fidelity Investments (8), the average retired couple will need about $345,000 to cover health care costs after age 65, a steep figure underscoring Orman’s warning that Medicare doesn’t mean free care. It’s a warning that all Americans should heed.

“I sure hope those of you who are not yet 65 pay close attention, too,” Orman wrote in her blog (7).

“Understanding all the costs Medicare requires enrollees to cover out-of-pocket can be an eye-opener that can motivate you to save up more in your retirement accounts, calibrate your spending, or even consider post-retirement opportunities to earn some income.”

Read More: Here’s the average income of Americans by age in 2026. Are you falling behind?

While the numbers may seem daunting, there are steps you can take to reduce health care costs in retirement. Here are a few strategies for you to plan for your golden years.

If you’re still working and enrolled in a high-deductible health plan, an HSA offers three tax advantages: tax-deductible contributions, tax-free growth and tax-free withdrawals for qualified medical expenses. Unused funds roll over and can be a powerful tool to offset medical costs in retirement.

Beyond general savings, consider setting aside a separate fund just for health care needs. This keeps you disciplined while helping to avoid drawing down your retirement accounts too fast when significant expenses arise. The last thing you want to do is initiate a hardship withdrawal by pulling money out of your retirement accounts, like a 401(k), to cover a surprise medical emergency.

When building out your emergency fund, make sure to look for a combination of high-yield rates and liquidity so you can access your cash when you need it.

A high-yield account like a Wealthfront Cash Account can be a great place to grow your uninvested cash, offering both competitive interest rates and easy access to your money when you need it.

A Wealthfront Cash Account currently offers a base APY of 3.30% through program banks, and new clients can get an extra 0.75% boost during their first three months on up to $150,000 for a total variable APY of 4.05%.

That’s ten times the national deposit savings rate, according to the FDIC’s March report.

Additionally, Wealthfront is offering new clients who enable direct deposit ($1,000/mo minimum) to their Cash Account and open and fund a new investment account an additional 0.25% APY increase with no expiration date or balance limit, meaning your APY could be as high as 4.30%.

With no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers, your funds remain accessible at all times. Plus, you get access to up to $8M FDIC Insurance eligibility through program banks.

Even if you don’t end up needing your emergency fund for healthcare, it can still help you out in other ways. For example, if the market’s down as your approach retirement you could lean on your fund to delay drawing down from your retirement accounts and catch a potential rebound. In a pinch, your emergency fund can also cover an unexpected job loss.

Fidelity’s health care cost estimate excludes long-term care, which can cost upwards of $100,000 annually in some states (10). Purchasing long-term care insurance early can protect your retirement nest egg from these steep costs.

Long-term care insurance offers coverage for the costs of in-home assistance, nursing homes or assisted living facilities.

Without proper planning, paying for this kind of care could deplete your retirement fund. In many cases, the burden of paying for care often then falls on family members — potentially straining their finances.

GoldenCare offers different options based on your needs, including hybrid life or annuity with long-term care benefits, short-term care, extended care, home health care, assisted living and traditional long-term care insurance.

With GoldenCare, you can even combine life insurance policies with a long-term care insurance policy to give both you and your family peace of mind. Ideally, this can help further reduce risk beyond covering the Medicare gap.

Premiums for Medicare Part B are based on your modified adjusted gross income (MAGI). If you’re nearing retirement, consult a financial planner about reducing MAGI through Roth conversions, charitable giving or other tax strategies to avoid premium surcharges. They may also be able to help you take advantage of any additional deductions that were packaged with the One Big Beautiful Bill Act.

This can be especially important if you’ve been saving diligently in the lead up to retirement.

If you have a portfolio of $250,000 or more, platforms like WiserAdvisor can connect you with vetted professionals who specialize in this kind of planning.

Simply answer a few questions about your savings, retirement timeline and overall investment portfolio.

From there, WiserAdvisor reviews its network to match you — for free — with up to three vetted, reputable advisors aligned with your specific needs.

You can then schedule no-obligation consultations with your matches to determine who is the best fit for your long-term goals — healthcare related or otherwise.

WiserAdvisor is a matching service and does not provide financial advice directly. All matched advisors are third parties, and specific financial results are not guaranteed.

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Suze Orman (1), (2); AARP (3); Centers for Medicare & Medicaid Services (4); KFF (5); Centers for Disease Control (6), (7); Fidelity Investments (8); Federal Deposit Insurance Corporation (9); Long Term Care Federal Insurance Program (10)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.