Retirement healthcare expenses remain one of the least understood and most unpredictable components of a financial plan, according to a new survey from D.A. Davidson. The March 2026 survey, conducted online by Big Village from February 13 to 15 among 1,006 U.S. adults, found that just 16% of respondents feel very knowledgeable about what healthcare will cost them in retirement. That knowledge gap persists even as 78% say they worry about the impact of rising medical costs on their retirement.
The survey also revealed a significant disconnect between concern and action. Only 48% of respondents have incorporated healthcare costs into their retirement planning, and just 23% have discussed the topic with a financial advisor. Six in ten respondents said they have watched a loved one struggle to pay for care in retirement, a personal experience that often shapes their own planning—or lack thereof.
The financial stakes are substantial. Fidelity Investments' latest Retiree Health Care Cost Estimate puts the average lifetime healthcare bill for a 65-year-old retiring in 2026 at $185,500, a 7.5% increase from the prior year. That figure excludes long-term care, which can add tens of thousands of dollars to the total. As healthcare inflation continues to outpace general inflation, the burden on retirees is only expected to grow.
Why clients delay planning
Andrew Crowell, a financial advisor and vice chairman of wealth management at D.A. Davidson, said many clients, particularly younger and healthier ones, tend to postpone planning for healthcare costs because they rarely envision a worst-case scenario. "Waiting too long to plan for future healthcare expenses can severely impact a retirement strategy," Crowell said. He emphasized the power of compound interest, noting that even modest contributions can make a difference over time. "Even $25 a month invested strategically can compound and start guarding against healthcare inflation," he added.
Ashley Weeks, a wealth strategist at TD Wealth, pointed to two common reasons for the lack of urgency: immediate financial concerns and the mistaken belief that Medicare will cover all health needs. "Failing to preemptively plan for retirement health costs can derail an otherwise thorough financial plan," Weeks said. Peter Hoglund, senior vice president and financial advisor at Wealth Enhancement, added that the topic is often emotionally charged. "Families that have seen the nightmare health scenario play out first-hand... are able to prepare with more clarity, but it can also become an outsized fear and cause under-preparedness in the rest of the financial plan," he said.
Medicare's coverage gaps
Medicare does not cover everything, and advisors stress that clients need to understand its limitations. Crowell noted that medical inflation typically runs at least double the broader inflation rate, so today's out-of-pocket costs understate future expenses. He recommended that clients talk to an advisor about what Medicare does and does not cover, and consider supplemental savings like HSAs to bridge the gap.
Weeks highlighted a cost that higher-income retirees often overlook: the income-related monthly adjustment amount (IRMAA), a surcharge on Medicare premiums for those above certain income thresholds. For 2026, the standard Part B premium is $202.90 per month, up $17.90 from 2025, while individuals with modified adjusted gross income of $500,000 or more pay $689.90 per month, according to the Centers for Medicare & Medicaid Services. Planning software, Weeks said, has improved in recent years by factoring in health status, life expectancy, and location to project out-of-pocket spending before and after Medicare eligibility.
HSAs as a strategic tool
All three advisors singled out the health savings account (HSA) as a powerful vehicle for retirement healthcare funding. HSAs offer a triple tax advantage: contributions are pre-tax, investments grow tax-free, and withdrawals for qualified medical expenses are tax-free. For 2026, the IRS caps contributions at $4,400 for self-only coverage and $8,750 for family coverage, with an additional $1,000 catch-up contribution for those 55 and older.
Weeks urged eligible workers to contribute as much as possible and invest the balance rather than leaving it in cash. "An HSA is a triple tax advantaged account that can compound over decades and assist with medical expenses in a tax-efficient way," he said. Yet many savers leave this potential untapped: Fidelity has found that 40% of HSA holders have not invested their balances, and only 13% of D.A. Davidson's survey respondents named HSAs as a planned source of retirement healthcare funding. As health-benefit costs continue to outpace wages, HSAs are becoming an increasingly important part of the retirement toolkit.
Hoglund cautioned that HSAs have limits. Annual contribution caps are modest relative to the potential size of late-life healthcare bills, and there are few other accounts designed specifically for medical costs. He recommended starting with a comprehensive financial plan and then stress-testing it for a major health event. "Building in the potential for a healthcare event that adds significant expense and understanding what the net result of this can provide clarity and takes away the uncertainty of the unknown," he said.
For advisors, the message is clear: early planning and strategic use of HSAs can help clients avoid a healthcare cost shock in retirement. As fear of health costs in retirement remains widespread, those who act now may be better positioned to manage the financial impact.
