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You Earned a Pension—But Rising Health Costs Could Still Eat Away at Your Monthly Check

Missy E
November 14, 2025

Key Takeaways

Even with a reliable pension from your public sector career, rising healthcare expenses in retirement can significantly reduce your monthly income.
Understanding how programs like FEHB, Medicare, and supplemental coverage interact—and planning for premium increases—can help preserve your financial stability over time.

Your Pension Isn’t Immune to Inflation—Especially in Healthcare

As a government retiree, your pension likely forms the backbone of your retirement income. You’ve earned it after years of service. But in 2025, one of the biggest threats to that steady income isn’t a market downturn—it’s the surging cost of healthcare.

Healthcare inflation continues to outpace general inflation, and even though COLAs (Cost-of-Living Adjustments) help keep your pension aligned with broader price increases, they don’t necessarily cover the specific rise in medical expenses. This includes premiums, deductibles, coinsurance, and prescription drug costs.

FEHB Coverage Doesn’t Guarantee Predictability

The Federal Employees Health Benefits (FEHB) Program remains a valuable benefit in retirement. You can continue your enrollment into retirement if you meet eligibility criteria and have been enrolled for the five years preceding your retirement. But staying enrolled is only part of the picture—budgeting for what it will cost you going forward is just as critical.

In 2025, average FEHB enrollee premiums have risen by 13.5%, following an 8.7% increase in 2024. These increases are not rare. Historically, annual premium hikes have ranged between 6% and 14%. While the federal government continues to pay about 70% of the premium, the remaining portion still represents a growing monthly burden on your annuity.

Why This Matters

Premium increases are unpredictable. Even a few percentage points each year can compound over time, eating away at what might have seemed like a comfortable monthly check.
Plan changes can drive higher out-of-pocket costs. Higher deductibles, coinsurance rates, and copayments may shift more cost to you over time.
Prescription costs remain volatile. While Medicare Part D and some FEHB plans offer drug coverage, formulary changes and the elimination of certain generics can lead to higher costs unexpectedly.

Medicare Integration Brings Relief—But Only If You Enroll

If you’re 65 or older in 2025 and retired from government service, you’re likely eligible for Medicare. FEHB plans coordinate with Medicare Parts A and B, but many retirees delay enrolling in Part B because of the additional premium.

This decision can backfire. FEHB plans often waive deductibles, lower copays, and offer broader coverage when paired with Medicare. Skipping Part B may lead to:

Higher cost-sharing. Without Medicare Part B, FEHB plans typically become your primary insurance, meaning you’re responsible for higher out-of-pocket expenses.
Late enrollment penalties. If you miss your Initial Enrollment Period and don’t qualify for a Special Enrollment Period, you may owe a penalty for as long as you remain enrolled in Part B.

Starting in 2025, certain programs, including the Postal Service Health Benefits (PSHB) program, require Medicare-eligible annuitants and family members to enroll in Medicare Part B to maintain full plan coverage. If you fall into this category and don’t enroll, you could lose drug coverage or face limited benefits.

The Real Cost of Healthcare in Retirement

Planning for health expenses in retirement means accounting for more than premiums. Your overall healthcare costs can include:

Monthly premiums for FEHB and/or Medicare
Part B premiums (standard is $185 per month in 2025)
Part D or prescription drug costs, capped at $2,000 annually in 2025
Deductibles (e.g., $257 for Part B, $1,676 per benefit period for Part A)
Coinsurance and copayments (e.g., $209.50 per day for skilled nursing after day 20)
Vision, dental, and hearing care not covered by Medicare

Altogether, retirees can expect to spend thousands per year on healthcare—even with good coverage. For some, this means devoting 20% or more of their annuity toward medical costs.

How Out-of-Pocket Limits (And Gaps) Affect You

While both FEHB and Medicare offer out-of-pocket protections, they are not comprehensive in isolation.

Under FEHB:

Plans have in-network maximums, typically between $5,000 and $7,500 for individuals and $10,000 to $15,000 for families.
Out-of-network costs may be substantially higher.

Under Medicare:

Part A and B have no true annual out-of-pocket cap unless paired with supplemental coverage or a Medicare Advantage plan.
In 2025, Part D includes a $2,000 annual cap on drug costs, a significant improvement—but only for covered drugs.

You must evaluate whether your existing FEHB plan covers enough or whether you need to pair it with Medicare or supplemental insurance for stronger protection.

Projecting 10 Years Ahead: What You Should Anticipate

If you’re retiring now or recently retired, it’s wise to model out your healthcare costs not just for the next year, but for the next decade. Here’s what to expect:

Premiums may rise by 6–10% annually. A $500/month premium today could become $800–$900/month in 10 years.
Prescription costs will likely increase. Even with the 2025 drug cap, higher utilization or uncovered drugs can drive up expenses.
You may need more services over time. Aging typically brings higher medical needs—more frequent doctor visits, procedures, or hospitalizations.
Vision, hearing, and dental costs may increase. These often become more important as you age, but many plans don’t fully cover them.

What You Can Do to Stay Ahead

The good news is that you still have control over how healthcare affects your retirement. Some actions can reduce risk and help you stay financially stable:

1. Budget for More Than Premiums

When planning your monthly expenses, don’t stop at premiums. Include:

Average deductibles for your plan
Out-of-pocket maximums for in-network services
Prescriptions you currently take and their potential tier changes
Non-covered services like dental cleanings, glasses, or hearing aids

2. Evaluate Medicare Enrollment Timing

If you’re nearing age 65 and not yet enrolled in Medicare Part B, revisit your decision. Enrolling on time can offer better coordination with your FEHB plan and avoid late penalties. If you’re covered by PSHB, remember the new mandate.

3. Consider a High-Deductible Health Plan with an HSA (Before Retirement)

Before you retire, you may want to take advantage of a high-deductible plan paired with a Health Savings Account (HSA), which allows you to save pre-tax dollars for future medical expenses. In 2025, the contribution limit is $4,300 for individuals and $8,550 for families, with an extra $1,000 catch-up if you’re over 55.

4. Review Plan Materials Annually

During Open Season (every November to December), compare plans. Even if you’re satisfied with your current FEHB plan, a competing option might offer better drug coverage or lower cost-sharing.

5. Prepare for Long-Term Care Gaps

Neither Medicare nor FEHB provides full coverage for long-term care. Begin considering whether you need savings, family support, or separate insurance to handle potential custodial care costs.

6. Adjust Your Withdrawal Strategy

If your retirement income includes TSP or IRA withdrawals, you may need to adjust your strategy to account for rising medical costs. Factor in required minimum distributions (RMDs) and their tax implications.

Rising Healthcare Costs Could Quietly Drain Your Pension

A steady pension doesn’t guarantee a worry-free retirement if health expenses are growing faster than your income. Without proactive planning, even a well-earned monthly check can fall short of covering your actual needs.

Make sure you model different scenarios, plan for long-term care, and coordinate your FEHB and Medicare benefits strategically. And most importantly, review your choices every year—what worked five years ago may not protect you in 2025 and beyond.

For help understanding your specific situation, get in touch with a licensed agent listed on this website for professional advice tailored to your retirement plan.