Health Care Costs for Couples in Retirement Rise to an Estimated $245,000

  • Health Savings Account
  • Health Savings Account
  • Health Savings Account
  • Health Savings Account
  • Health Savings Account

BOSTON – While many things get better with age, new research shows the cost of health care isn't one of them. Fidelity's Retirement Health Care Cost Estimate reveals that a couple, both aged 65 and retiring this year, can now expect to spend an estimated $245,000 on health care throughout retirement, up from $220,000 last year1.

The figure has increased 29 percent since 2005 when it was $190,000 (see chart). Factors boosting this year's estimate include longer life expectancies and anticipated annual increases for medical and prescription expenses2. The estimate assumes enrollment in Medicare health coverage but does not include the added expenses of nursing home or long-term care.

"The sticker shock of $245,000 hopefully reinforces for many people that they need to act now, regardless of their age," said 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."

Strategic Choices Can Help Mitigate Costs

As pre-retirees evaluate health insurance options for retirement, they may wish to consider private Medicare Advantage programs available in their area. Under typical Medicare Advantage plans, people pay monthly premiums to a private insurer and in many cases have a higher percentage of claims and prescriptions covered versus traditional Medicare. Over an extended time period like a couple's retirement, this option could reduce their overall costs.

For people enrolled in high-deductible health plans paired with health savings accounts (HSAs), Fidelity recommends they open an HSA to save for qualified health care expenses today and in retirement. HSAs are a convenient way to pay for current and future medical expenses through a tax-advantaged account3. Contributions that are not spent each year may carry-over and be invested to help pay for health care in retirement (see Three Healthy Habits for HSAs).

Transitioning into Retirement? Don't Go It Alone

In Fidelity's 2015 Couples Retirement Study, nearly three-fourths of couples surveyed said being able to afford unexpected health care costs in retirement was their top concern. However, only 22 percent of couples had factored it into their financial planning4. "People transitioning into retirement should seek help from trusted resources such as their retirement provider, employer or financial advisor," said Kimler. "Important decisions on when to retire, how to manage debt or choosing health insurance will have a lasting impact."

"Clients routinely tell us they're worried about retirement medical expenses, so we make sure to add health care into all our planning conversations," said Michael Gouldin, CEO and President, Gouldin & McCarthy, LLC, an independent advisory firm in Basking Ridge, N.J.

In addition to helping investors prepare for the escalating costs of health care in retirement, Fidelity offers education on a broad range of retirement savings issues, including: asset allocation in 401(k)s, 403(b)s and IRAs, developing a retirement income plan, and how to rollover a 401(k). Help is provided by phone representatives, at workplace education seminars, online and over mobile devices, and in-person at Fidelity's 180 investor centers nationwide. The firm also posts informative content on 401k.com, on Twitter and Facebook, and through Viewpoints (Retiree Health Costs Rise) on Fidelity.com.

About Fidelity Investments

Fidelity's goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. With assets under administration of $5.1 trillion, including managed assets of $2.0 trillion as of August 31, 2015, we focus on meeting the unique needs of a diverse set of customers: helping more than 24 million people invest their own life savings, nearly 20,000 businesses manage employee benefit programs, as well as providing nearly 10,000 advisory firms with technology solutions to invest their own clients' money. Privately held for nearly 70 years, Fidelity employs 42,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.

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