Here’s How Much Health Care Will Cost You in Retirement

Senior health care patient
Studio Romantic /

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 $300,000 in health care and medical expenses during retirement, according to Fidelity’s 20th annual Retiree Health Care Cost Estimate.

For single people, the cost is likely to be $157,000 for women and $143,000 for men.

The new number is a jump of 30% from a decade ago. But the news is not all bad. The 2021 figures are up just 1.7% from a year ago. Fidelity notes that in recent years, health care inflation has remained relatively tame.

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:

  • 58% of current employees say they have spent little or no time thinking about what they need to cover in retirement
  • Among those who have thought about health care costs in retirement, 50% think they will need just $50,000 or less to cover such costs

In coming up with its calculations, Fidelity assumes retirees are 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. The retirees also are assumed to be enrolled in Medicare Part D, which covers prescription drugs.

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:

“We continue to see many [health savings account] owners not using these accounts to their full potential, in particular not using the power of investing to potentially grow their savings. And that’s the step that can make a big difference, especially for younger people with time on their side.”

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:

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