Contrary to popular belief, many Americans are not living a lavish retirement. While some may enjoy the occasional trip or indulge in a new hobby or two, let’s be clear–the average retiree is by no means wealthy. In fact, most public employee retirees live on a modest fixed income. While some may have accumulated what others may view as a “generous” retirement benefit, there are significant expenses that burden today’s retirees, such as health care, long-term care, dental care, and inflation. 

Income Overview

Before we dive into the many expenses eating away at retirees’ income, let’s get realistic about what’s in their pockets. According to Fidelity Investments, the median 401(k) account balance for those age 60-69 is $62,000, which is clearly not enough to retire with. The average public pension recipient receives around $22,000 a year, which could be more or less depending on the individual’s state, and job title or position. 

Healthcare & Prescriptions

While healthcare is one of the more costly expenses in retirement, it is also one of the most essential. According to a 2021 Fidelity report, the average 65-year-old couple would need to have saved $300,000 after taxes for healthcare costs in retirement, “and that’s just for regular health care. That’s not even counting unexpected chronic illness care,” said Michelle Gessner, a certified financial planner in Houston. The standard premium cost for couples in 2022 is $4,000 a year. Because older people tend to need more medical care, healthcare premiums become more expensive as they age. Where and how long one lives also plays a role in costs. According to World Population Review, healthcare costs vary from state to state for two reasons–the price of services and the amount of service used. States that have a predominantly younger population will have lower prices for seeing a doctor or specialist. In comparison, other states may have a higher population of those 65 and older, putting more demand on medical services resulting in higher total healthcare costs over time. 

When considering the healthcare cost of retirees, it’s also important to factor in prescription costs. According to NerdWallet, 1 million retirees enrolled in Medicare Part D have had drugs prescribed that exceeded the “catastrophic” coverage threshold, which today is $7,050. Once participants in Medicare Part D hit the catastrophic threshold, they are expected to pay coinsurance or a copay; however, there is no cap on out-of-pocket expenses under this plan, which can eat more of a retiree’s income if the drug is expensive. Retirees with conditions requiring specialty drugs, such as cancer or multiple sclerosis, can quickly rack up out-of-pocket costs. Tess Zigo, a CFP in Palm Harbor, Florida, said, “My dad has rheumatoid arthritis, and his drugs cost $6,000 per month. What retiree has $6,000 a month just for drugs?”

Long-term Care

About one in four seniors require long-term care when they reach the age of 80, and that care comes at a high price. Assisted living facilities cost an average of $4,500 a month. Home health aides can cost as much as $30 an hour or more depending on the state, which can also be very costly in the long term.

Dental Care

Basic Medicare plans don’t cover most traditional dental care, and 47% of Medicare beneficiaries go without supplemental dental plans. However, dental costs can add up for retirees as gum disease, tooth loss, and oral cancer are more significant concerns for seniors. According to the Kaiser Family Foundation, the average senior with Medicare using dental services paid nearly $900 a year out of pocket, and one in five Medicare beneficiaries spent more than $1,000. 


Unlike the other expenses covered, inflation is an expense retirees can’t plan for, yet it’s one of the most significant expenses for retirees today. Costs of goods and services like gas, food, and clothing have spiked significantly. According to Market Watch, the Consumer Price Index hit a 40-year high of 8.5% in March. Most retirees are seeing a major uptick when it comes to their grocery bills. Meats, dairy, and food produced outside the home have seen its largest increase since 1981. Beef is up 20%, chicken is up 13.4%, and eggs are up 11.2%.  Many retired public employees are concerned about whether they will be able to make ends meet in retirement, as many of them have not received a cost-of-living adjustment (COLA) in over a decade. 

Retirement is expensive, and unless you’re rolling around in wealth (which most retirees are not), there’s nothing lavish about it. Healthcare, prescriptions, long-term care, and inflation are all existing expenses that eat away at retiree dollars every day. Of course, retirement is not only about paying for the necessities, it’s to be enjoyed, but that too costs money. So the next time someone claims that retirees make too much in retirement, educate them on the many expenses retirees face day-to-day.