- The average 65-year-old American can expect to spend about $172,500 on health care and medical expenses throughout their retirement.
- Although health care costs are growing, many Americans have not considered or planned for them.
- Additionally, many Americans are unaware of resources that make health care in retirement cheaper, like Health Savings Accounts.
The cost of health care for retirees keeps climbing, but many people aren’t planning accordingly or using resources that can make these expenses more affordable.
A 65-year-old American retiring this year should expect to spend, on average, $172,500 on health care and medical expenses throughout their retirement, according to estimates by Fidelity. That includes premiums for Medicare insurance, as well as copayments, over-the-counter medications, and dental and vision care that Medicare does not cover.
The total cost for retirement health expenses is up 4% from 2024, according to Fidelity. That’s on par with medical care cost increases for all Americans, which rose by almost 3% from 2024 and by more than 30% over the past decade, according to Consumer Price Index data.
What You Can Do
Yet, a survey from Fidelity found that one in five Americans say they never considered health care when planning for retirement, and 17% have not taken action to prepare for these increasing health expenses.
“Year after year, so many Americans underestimate how much they’ll need to save to cover health care costs in retirement,” Shams Talib, head of Fidelity Workplace Consulting, said in a press release. “Pre-retirees and retirees alike can take greater control of their financial futures by beginning the planning process as soon as possible.”
But there are savings plans that can help with medical costs in retirement. Health Savings Accounts are tax-advantaged savings accounts Americans can use for qualified medical expenses. These health care accounts have grown in popularity; the number of Fidelity HSA accounts grew by 23% from the beginning of 2024 to the end of the year.
Still, many Americans don’t know about these programs. Currently, less than a quarter of Americans say they are contributing to an HSA. And over half of 55-to 64-year-olds who are on the verge of retiring told Fidelity in 2023 that they weren’t aware that HSAs can be used to save for retirement.