Insurance costs have skyrocketed since the pandemic — and show few signs of slowing down. That makes it hard to plan for costs in retirement, as the goalposts keep moving.
For You: How Long $2 Million in Retirement Will Last in Every State
Trending Now: 10 Genius Things Warren Buffett Says To Do With Your Money
Keep an eye on these three insurance costs in particular as you plan your retirement nest egg.
Supplemental Medicare Coverage
Yes, retirees become eligible for Medicare coverage at 65. However, it doesn’t cover everything.
“The average American spends nearly $200,000 on healthcare expenses during their golden years,” noted Whitney Stidom, vice president of consumer enablement at eHealth Insurance. In fact, a 2025 study by the Employee Benefit Research Institute found that some couples need up to $428,000 to have a 90% chance of covering their healthcare costs in retirement.
A new survey from eHealth found 76% of people underestimate (or don’t know) the average cost of healthcare in retirement. “Enrolling in Medicare Advantage is often affordable, and will limit maximum out-of-pocket costs for the year,” said Stidom. “Plus, most Advantage plans come with prescription drug coverage. Some Medicare Advantage plans come with special benefits like discounted gym memberships, coverage for over-the-counter drugs and more.”
To help prepare in advance for unpredictable healthcare and supplemental Medicare coverage costs, consider opening a health savings account (HSA). They offer the best tax benefits of any tax-advantaged account, as you can deduct the contributions, they compound tax-free, and you pay no taxes on withdrawals.
I’m a Financial Expert: This Is the No. 1 Mistake Americans Make With Their 401(k)
Long-Term Care Insurance
Medicare doesn’t cover long-term care — but it gets expensive, and fast. The “2025 Trends in Retirement Planning” study by the Journal of Financial Planning found that 40.7% of retirees carry long-term care insurance, and 44.9% pay for a rider on other insurance products.
Unlike working people, retirees can’t increase their income to offset rising costs. When insurance rates go up, retirees have to cut spending elsewhere to stay afloat — which can quickly downgrade their quality of life.
Homeowners Insurance
The last few years have not been kind to homeowners insurance clients.
“Currently the average homeowner is paying $2,802 for home insurance,” explained Susan Meyer, insurance analyst at The Zebra. “In 2024, the average was $1,602 for the same coverage — a 74% increase in only a year.”
Granted, most homeowners aren’t actually paying 74% more for their policies after just one year. Many have downgraded coverage or increased their deductible just to afford policies at the new rates.
Homeowners insurance may play a larger role in where Americans choose to retire in the coming years. Already, three of the four states with the oldest populations (Maine, West Virginia, Vermont and Florida) have below-average homeowners insurance premiums. Meyer noted that the exception, Florida, has an average premium of $3,333 given the high frequency of storm damage.
Similarly, climate scientist Max Dugan-Knight at Deep Sky Research pointed to fire-prone areas in California, Oregon and Texas where private insurers have stopped issuing coverage altogether. “State-backed FAIR plans and federal flood insurance program end up billing taxpayers rather than addressing the root problem that some homes are uninsurable,” he said. “That forces all taxpayers to subsidize the few who live in the highest risk areas.”
As you plan your retirement, consider factoring in insurance risk. Some higher-risk areas may become impractical to insure in the years to come.
More From GOBankingRates
- 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025
- 4 Things You Should Do if You Want To Retire Early
- 4 Affordable Car Brands You Won't Regret Buying in 2025
- 25 Places To Buy a Home If You Want It To Gain Value
This article originally appeared on GOBankingRates.com: The No. 1 Cost Threatening Your Retirement Savings
