This Is How Much Health Care Now Costs Retirees

Photo by Potstock / Shutterstock.com

A couple retiring this year would need more than a quarter of a million dollars simply to cover medical costs during their golden years, Fidelity Investments reports.

A 65-year-old man who retires this year would need $135,000 for health care expenses throughout his retirement, according to Fidelity’s latest annual estimates, which the company released this week. A 65-year-old woman in the same situation would need $150,000.

The combined total of $285,000 for that hypothetical couple represents an increase of 3.6% over the past two years. The good news is that’s a lot less than the increase over the prior two years: Fidelity’s combined estimate grew from $245,000 in 2015 to $275,000 in 2017 — an increase of 12.2%.

The bad news is that the latest estimates do not include all health-related expenses. They exclude over-the-counter medications, most dental services and long-term care.

More bad news: Fidelity’s estimates are based on the assumption that the retirees are eligible for the federally subsidized Medicare health insurance program.

So, a couple who want to retire before 65 — the age at which you generally become eligible for Medicare — would likely need more than that estimated $285,000 to fund medical expenses in retirement.

It’s worth noting, however, that Fidelity’s estimates assume that the retirees chose Original Medicare, also referred to as traditional Medicare, rather than Medicare Advantage. The former type of Medicare plan tends to cover fewer expenses than the latter, as we explain in “7 Facts You Need to Know About Medicare.”

Coping with sky-high medical expenses

One way to get around the astronomical cost of health care in the U.S. is to retire abroad.

Last year, the publication International Living named Costa Rica the best country in the world for retirees in large part due to its cheap but modern national health care system.

If leaving the country sounds a little too drastic for you, consider a health care savings account (HSA) if you’re eligible for one. Saving money in an HSA enables you to avoid ever paying taxes on that money.

As we explain in “3 Reasons You Need a Health Savings Account — and How to Open One Today“:

“… you get a tax deduction for the money you put into the account. Then, the earnings grow tax-free. And, as long as you use it for qualified health care expenses, you don’t pay taxes on the money you withdraw from the account. It’s truly tax-free.”

Additionally, if you open your HSA with a custodian like Lively, which allows you to invest the money in your account, your HSA can double as a retirement savings account.

HSAs are not subject to a use-it-or-lose-it provision like health flexible spending accounts, or FSAs. So, you can basically leave your money in an HSA indefinitely, letting it grow.

In fact, if you saved money in an HSA throughout your working lifetime, you just might have enough to cover six figures worth of medical expenses by the time you reach retirement.

According to Fidelity Investments, it’s possible for a 35-year-old couple to save up about $288,000 by the time they reach retirement if they put $2,820 in an HSA each year for 30 years. That assumes the couple earns a 7% return on the money in their HSA — which is plausible if they invest it.

Find the right financial adviser

Finding a financial adviser you can trust doesn't have to be hard. A great place to start is with SmartAsset's free financial adviser matching tool, which connects you with up to three qualified financial advisers in five minutes. Each adviser is vetted by SmartAsset and is legally required to act in your best interests.

If you're ready to be matched with local advisers who will help you reach your financial goals, get started now.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
10 Common Expenses That Have Skyrocketed for Seniors
10 Common Expenses That Have Skyrocketed for Seniors

Retirees must stretch their dollars further and further these days — no thanks to these costs.

Beware These 5 Common Work-From-Home Scams
Beware These 5 Common Work-From-Home Scams

You can spot scammers and con artists with a little know-how.

9 Free Things That Used to Cost Us Money
9 Free Things That Used to Cost Us Money

Not everything is getting more expensive.

7 Ways to Save Money Without Trying
7 Ways to Save Money Without Trying

Saving money doesn’t always mean drudgery and sacrifice. These tools make it easy — sometimes even fun.

28 Things You Should Never Pay For — and How to Get Them for Free
28 Things You Should Never Pay For — and How to Get Them for Free

From entertainment to education, if you know the tricks, you can save big.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

This Is the Most Popular Age for Claiming Social Security
This Is the Most Popular Age for Claiming Social Security

Both men and women are most likely to start receiving Social Security benefits at this age.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?
Could You Give Up These 7 Expenses to Save Thousands of Dollars a Year?

You could save more than $30,000 by setting aside these costly expenses for just one year.

6 Things You Should Never Buy at Trader Joe’s
6 Things You Should Never Buy at Trader Joe’s

We love Trader Joe’s for plenty of reasons. But think twice about this handful of products.

Don’t Toss These 7 Household Items — Sell Them
Don’t Toss These 7 Household Items — Sell Them

Here’s how to earn cash as you give new life to these unwanted items.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have these documents that are crucial to their golden years — especially during a pandemic.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

7 Unusual Ways to Declutter Your Home
7 Unusual Ways to Declutter Your Home

Tired of possessions weighing you down? Here are seven ways to declutter painlessly and effectively.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

11 Expenses That Quietly Drain Your Wallet
11 Expenses That Quietly Drain Your Wallet

It’s scandalously easy to overspend in these areas of your life.

5 Ways Joe Biden Wants Social Security to Change
5 Ways Joe Biden Wants Social Security to Change

Here’s where Biden — as well as Trump — stands on the future of the Social Security retirement system.

9 Dumb Ways You Are Ruining Your Home Value
9 Dumb Ways You Are Ruining Your Home Value

Homeowners, beware these mistakes that can drive away potential buyers.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

7 Tips for Building an Emergency Stockpile
7 Tips for Building an Emergency Stockpile

A pandemic or natural disaster could leave you reliant on your existing food supply. Is your pantry prepared?

10 Deep Discounts Available on Amazon This Friday
10 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

10 Things That Really Are Free on Amazon
10 Things That Really Are Free on Amazon

These freebies are available to anyone — no Prime membership necessary.

21 Things You Should Always Buy at a Dollar Store
21 Things You Should Always Buy at a Dollar Store

Dollar stores have great bargains on both everyday and occasional purchases.

15 Outrageously Overpriced Products — and How to Save on Them
15 Outrageously Overpriced Products — and How to Save on Them

Retailers mark up products by hundreds of times their cost — but you don’t have to pay the premium.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.