Annual Healthcare Budget Template

Why do retirees who track every other expense still underbudget healthcare? Because they count the premiums they can see and miss everything stacked behind them, the surcharges, the out-of-pocket costs, the gaps Medicare leaves wide open. This template captures the whole bill, so the fastest-rising line in your retirement doesn’t catch you short.

The reasoning behind why this line grows faster than the rest is in healthcare inflation in retirement. The actions to build a complete annual number are here. Build it once, then update it each fall at the annual Medicare review.

Line 1: Medicare premiums

• Enter the standard Part B premium, $202.90 a month per person for 2026.
• Add your Part D drug plan premium.
• Add your Medigap premium if you have one, or note your Medicare Advantage premium instead.
• Multiply by two if you’re a couple. Both spouses pay separately.

Line 2: IRMAA surcharges

• Check your income against the IRMAA brackets. Above the threshold, add the Part B surcharge, up to $487.00 a month per person at the top tier in 2026.
• Add the Part D IRMAA surcharge if it applies, $14.50 to $91.00 a month per person.
• Remember the two-year lookback. Your 2026 surcharge is based on 2024 income, so a big conversion or gain shows up here later.

Line 3: Out-of-pocket medical

• Estimate deductibles and coinsurance for the year. The 2026 Part B deductible is $283.
• Add a realistic figure for copays and the costs your coverage doesn’t fully absorb.
• If you’re on bare Original Medicare without Medigap, budget for the fact that there’s no out-of-pocket cap.

Line 4: Prescriptions

• Total your expected annual drug costs under your current plan, using your actual medication list.
• Re-shop the plan each fall, because formularies and pricing change and the cheapest plan rarely stays cheapest. See prescription drug optimization.

Line 5: The Medicare gaps

• Budget separately for dental, vision, and hearing, which Medicare largely excludes. See dental and vision planning.
• Reserve for big-ticket items you can anticipate: implants, dentures, hearing aids.
• If you travel or live abroad part of the year, add coverage for the time Medicare won’t follow you.

Line 6: The long-term care reserve

• This isn’t an annual premium for most people, it’s a reserve. Decide your funding approach using the long-term care checklist.
• If you carry LTC insurance, add the premium here and stress-test a rate increase.

Line 7: Inflate it forward

• Grow the healthcare total faster than your general spending in any projection. It rises faster than overall prices.
• Assume the number climbs as a share of spending in your later years, when costs peak.
• Fund tax-free where you can. A health savings account is the best vehicle for exactly these costs.

Pull it together

• Add Lines 1 through 5 for your current annual healthcare spend, then layer in the LTC reserve and the inflation assumption.
• Compare the total to what you’d been budgeting. For most people the real number is meaningfully higher.
• Revisit every fall during open enrollment, since premiums, brackets, and your own health all move.

Healthcare is the line item most people guess at and most underestimate, and the gap compounds into the years they can least afford it. Build the full number, the part you see and the part stacked behind it, and the fastest-rising cost in retirement becomes one you planned for instead of one that planned you.