How Much Would Health Care Cost If You Retired Today?

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Senior man with his doctor
Rob Marmion / Shutterstock.com

Your retirement dream may be to spend endless days sipping drinks on the beach — but watch out for the tsunami brewing just over the horizon.

As during your working life, health care expenses are likely to be among the costs that most put your finances at risk.

In fact, the average couple retiring this year can expect to spend $315,000 in health care and medical expenses during retirement, according to Fidelity’s 21st annual Retiree Health Care Cost Estimate.

For single people, the cost is likely to be $165,000 for women and $150,000 for men.

The new cost estimate reflects a jump of 5% over the past year and is nearly double what it was 20 years ago.

Fidelity says the survey is intended to help educate people about the cost of health care services during retirement. It appears people need such a primer. According to Fidelity research:

  • On average, Americans believe that a couple retiring this year would spend only $41,000 on health care expenses in retirement.
  • 68% of Americans believe that such a couple would spend a mere $25,000 on health care in retirement.

In coming up with its calculations, Fidelity assumes that the retiring couple are both age 65 and enrolled in traditional Medicare — including Medicare Part A and Part B, which cover expenses such as hospital stays, doctor visits and services, physical therapy and lab tests.

These hypothetical retirees also are assumed to be enrolled in Medicare Part D, which covers prescription drugs.

To get an idea of how much real-world retirees end up spending on medical expenses, check out “Here’s How Much Seniors Actually Spend on Health Care.”

Fidelity says today’s workers have great opportunities to save for retirement health care expenses but don’t always exploit those opportunities to the fullest. In a press release, Hope Manion, senior vice president of Fidelity Workplace Consulting, says:

“There continues to be an opportunity for additional education on the power of a health savings account, especially for younger people who likely have decades to save and invest before they retire. Furthermore, HSAs are also a great way to cover current qualified medical expenses.”

How an HSA can boost your retirement

We agree with Fidelity — opening an HSA is a great way to boost your retirement. As we point out in “5 Reasons to Use a Health Savings Account as a Retirement Fund“:

“A health savings account’s huge selling point is the fact that it is triple tax-advantaged:

  • You get a tax deduction during the year of contribution.
  • The money grows tax-free.
  • You withdraw the money tax-free when it’s used for qualified health expenses.

In essence, if you use HSA money to pay for health care expenses, it’s never taxed. Never.”

To be eligible for an HSA, you must have a high-deductible health insurance plan and otherwise qualify.

You will also have to choose an HSA provider, such as Money Talks News partner Lively. MTN contributor Miranda Marquit talks about her experience with Lively in “3 Ways a Health Savings Account Can Improve Your Finances.”

For more on HSAs, check out: