Data and Research

Health Care in Retirement Will Cost How Much?

There’s no way around it, health care cost projections for American retirees are grim, especially when mapped against what people actually have saved. 

By John Manganaro | October 07, 2015
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For many, generating $250,000 in savings seems like quite a far off dream, but Fidelity’s Retirement Health Care Cost Estimate study now projects Americans will need just about that much to pay for health care in retirement.

According to Fidelity, a healthy couple retiring this year at age 65 should expect to spend $245,000 on health care throughout retirement, up from $220,000 last year. The figure has increased 29% since 2005, Fidelity says, when the projection was a cool $190,000.

As in earlier years, Fidelity finds factors boosting this year’s estimate include longer life expectancies and anticipated annual increases for medical and prescription expenses. In reality the picture is probably even tougher for retirement savers, as the estimates assume enrollment in Medicare health coverage but do not include the likely expenses for nursing home or other forms of long-term care.

“The sticker shock of $245,000 hopefully reinforces for many people that they need to act now, regardless of their age,” says Brad Kimler, executive vice president of Fidelity’s Benefits Consulting Services. “For people offered a high-deductible health plan with a health savings account at work, choosing this option can really help them prepare, especially for Millennials who have a long time to save.”

Like other retirement plan and investment providers, Fidelity advocates that pre-retirees evaluate retirement health insurance options and health expense funding vehicles well in advance of actually leaving the workforce. People may look at their options and consider private Medicare Advantage programs available in their area, which Fidelity says could reduce couples’ overall costs in many cases.

NEXT: Only a few ways to reach $250K