Most Americans spend years planning what their golden years will look like, but few realize just how expensive getting older has become. According to recent research from MIT AgeLab, the average person needs far more than just retirement savings to handle the expenses that come with age. A 65-year-old couple today can expect to spend over $800,000 during their remaining years, covering everything from medical bills to long-term care. The worst part? Most people are completely unprepared for these costs, and traditional retirement planning often misses critical expenses that can drain savings faster than anyone expects.
Healthcare costs after 65 add up faster than you think
Turning 65 means qualifying for Medicare, which sounds like a financial relief until you see what it actually covers. Fidelity Benefits Consulting found that the average couple retiring today will need around $220,000 just for medical expenses throughout retirement. This figure doesn’t include everything Medicare skips over, like dental work, hearing aids, or prescription copays that can easily run hundreds of dollars monthly. Many seniors discover too late that their supplemental insurance still leaves them paying thousands out of pocket each year.
The numbers get even more staggering when you factor in inflation and rising healthcare costs. Unlike general inflation that hovers around 3% annually, medical expenses are climbing much faster. A simple hospital stay can cost tens of thousands of dollars even with insurance coverage, and chronic conditions like diabetes or heart disease require ongoing treatment that drains retirement accounts year after year. Brad Kimler from Fidelity warns that factoring healthcare into retirement planning isn’t optional anymore—it’s absolutely necessary to avoid financial disaster later in life.
Long-term care will probably cost more than your house
Nearly 70% of Americans over 65 will need some form of long-term care during their lifetime, but most people have no idea what this actually costs. According to Genworth data, assisted living facilities average $48,000 per year, while skilled nursing homes can run $89,000 annually or more. Hiring a home health aide to help with daily tasks costs around $50,000 per year, and these prices vary wildly depending on where you live. The real shocker? Medicare and most standard health insurance plans don’t cover long-term care at all.
Long-term care insurance exists to help with these expenses, but only a small percentage of Americans actually have it due to expensive premiums and complicated rules about when coverage kicks in. Many people end up relying on Medicaid, which only helps after you’ve spent down nearly all your assets to qualify. In states like Michigan, Medicaid-covered nursing home residents keep just $60 per month for personal needs after their income goes toward care costs. For couples where one person needs care, this can mean watching a lifetime of savings disappear while the healthy spouse struggles to maintain their own living expenses.
Regular living expenses don’t disappear when you retire
Retirement often brings reduced income, but unfortunately bills don’t shrink along with paychecks. The Bureau of Labor Statistics reports that the average American spends about $20,194 annually on basic living expenses like food, housing, and transportation. For a couple, this jumps to around $50,485 per year. If you retire at 65 and live to the average age of 79, that’s 14 years of expenses totaling roughly $565,000 for a couple. This assumes everything stays exactly the same, which never happens.
Property taxes continue rising, homeowners insurance premiums climb, and even if you’ve paid off your mortgage, maintenance and repairs become more frequent as houses age. Utility bills don’t care that you’re on a fixed income, and neither does the grocery store. Many retirees find that downsizing or relocating can help reduce these costs, but moving comes with its own hefty price tag. Financial advisors suggest that planning for living expenses during retirement should account for at least 3% annual inflation, though some costs like healthcare and housing often increase faster than that.
Most Americans are completely unprepared for longer lifespans
People are living longer than ever before, but research shows most Americans underestimate how long they’ll actually live. Stanford retirement expert Annamaria Lusardi found that people generally believe they’ll die younger than statistics predict. A 65-year-old woman today has a 40% chance of reaching 90, while men have a 30% chance. Living longer sounds great until you realize it means decades more of expenses to cover. The MIT AgeLab created a Longevity Preparedness Index that scored Americans at just 60 out of 100 for overall readiness.
Joe Coughlin from MIT AgeLab points out that longevity on this scale is actually quite new. We’ve always had older people, but never this many living this long. Previous generations can’t serve as role models because they simply didn’t face the same challenges of 25 or 30 years of retirement. The study looked at eight different areas of preparation including social connections, finances, daily activities, care planning, home modifications, community access, health habits, and handling major life transitions. Americans scored worst in the care category at just 42 out of 100, showing most people have no plan for who will help them if they can’t manage alone.
The care crisis nobody wants to talk about
Planning for who will take care of you sounds morbid, but avoiding this conversation can lead to tragedy. Actor Gene Hackman and his wife Betsy Arakawa were found dead in their home in early 2025 after Hackman’s caregiver wife died first, leaving him helpless and alone with Alzheimer’s disease. This heartbreaking situation highlights what happens when there’s no backup plan. Most families never discuss these difficult topics, assuming everything will somehow work out when the time comes. It rarely does.
Simple questions like who will change a lightbulb when you’re 91 might seem trivial now, but they matter enormously later. Brooks Tingle from John Hancock emphasizes that just starting these conversations with family members makes a huge difference. Many people plan to rely on adult children or other relatives for care, but fail to discuss this assumption beforehand. Caregivers face much higher rates of stress, depression, and physical illness than their peers, often made worse by financial strain. Having honest discussions about expectations and backup plans can prevent crisis situations and reduce the burden on everyone involved.
Advance directives are ignored until it’s too late
Only about 25% of Americans over 50 have completed advance directives, the legal documents that spell out medical wishes and designate someone to make decisions if you become incapacitated. Without these documents in place, state laws determine who gets to make critical choices about your care and finances. This might mean an estranged child you haven’t spoken to in years has more legal authority than a long-term partner or close friend. Even worse, seniors without clear advocates can end up under court-appointed guardianship, a restrictive process that’s often impossible to reverse.
Creating advance directives means more than just filling out forms. It requires difficult conversations about end-of-life wishes, medical interventions you do or don’t want, and who should manage your finances if you can’t. Some people want to stay home as long as possible, even if it means accepting help with personal tasks like bathing. Others prefer moving to a facility once certain care needs arise. These preferences vary wildly between individuals, but family members left guessing during a crisis often make choices that don’t align with what their loved one would have wanted. Having these discussions early, while everyone’s healthy, makes everything easier later.
Your zip code matters more than your savings
Where you live during retirement affects quality of life just as much as how much money you’ve saved. Joe Coughlin from MIT notes that your zip code is probably a bigger predictor of well-being than your 401k balance. Access to healthcare, grocery stores, recreation, and reliable transportation becomes increasingly important as people age. Americans scored highest in the community category of the Longevity Preparedness Index at 70 out of 100, but this still leaves significant room for improvement. Many older adults find themselves isolated in suburban or rural areas once they can’t drive safely anymore.
Regional cost differences also play a major role in retirement expenses. The same level of care that costs $4,000 monthly in one city might run $8,000 elsewhere. Property taxes, utilities, and basic living costs vary dramatically across the country. Some people choose to relocate during retirement to areas with lower costs or better senior services, but moving away from established social networks can lead to isolation and depression. Weighing these factors requires honest assessment of current and future needs, including proximity to family members who might provide support as health declines.
Financial advisors help with more than just money
People who work with financial advisors scored 65 on the Longevity Preparedness Index compared to just 58 for those without professional guidance. The best advisors don’t just focus on investment returns—they help clients think through all the challenges that retirement brings. This includes estimating healthcare costs, planning for potential long-term care needs, and discussing difficult topics like what happens if one spouse needs expensive care while the other is still healthy. Having someone ask these hard questions forces people to confront realities they might otherwise avoid until it’s too late.
The wealth gap shows up clearly in preparedness scores. People with less than $50,000 in investible assets scored 56 overall, while those with over $3 million scored 65. Money obviously helps, but even wealthy people often fail to plan for non-financial aspects of aging like maintaining social connections or arranging for future care needs. Financial advisors who specialize in retirement planning understand that successful aging requires more than just having enough money in the bank. They help clients think through the complete picture of what their later years might look like and how to prepare accordingly.
Government programs are facing serious cuts
Many Americans count on Medicare and Medicaid to help cover aging costs, but these programs face uncertain futures. Recent federal budget cuts signed into law will progressively reduce Medicaid funding over the next decade. This means fewer people will qualify for assistance, and nursing homes will receive lower reimbursements, potentially affecting the quality of care available. The GUIDE Model program, which helps dementia patients and their caregivers, is still in pilot stages with uncertain expansion plans. Area agencies on aging that connect seniors with local resources like meals and transportation also face funding threats.
The Program for All-Inclusive Care of the Elderly helps some dual-eligible Medicare and Medicaid recipients stay home longer by providing comprehensive services including medical care and home health support. However, eligibility remains limited and future availability uncertain given budget pressures. Relying solely on government assistance for aging costs represents a risky strategy. Even people who currently qualify for programs may find eligibility requirements tightening or benefits shrinking over time. Building private resources and having backup plans becomes even more critical as public support systems face increasing strain from budget cuts and growing numbers of seniors needing services.
The true cost of aging in America extends far beyond what most people imagine when they picture retirement. Between healthcare expenses, long-term care, and basic living costs, couples can easily spend $800,000 or more after turning 65. The scariest part isn’t just the price tag—it’s how unprepared most Americans are for these expenses and the non-financial challenges that come with longer lives. Starting conversations now about care preferences, creating advance directives, and working with knowledgeable advisors can help avoid crisis situations later. Growing old in America is expensive, but planning ahead makes it manageable.
