Health Care Tab in Retirement: $275,000

By Ted Godbout • September 05, 2017 • 0 Comments
That’s the average amount a 65-year-old couple retiring this year will need to cover medical expenses (in today’s dollars) throughout retirement, according to the latest retiree health care cost estimate from Fidelity Benefits Consulting.

Fidelity notes that while the 2017 estimate of $275,000 is only a 6% increase from 2016, it represents a more than 70% increase since their initial retiree health care cost estimate in 2002. This amount applies only to retirees with traditional Medicare coverage; it does not include nursing home costs, the study notes.

The 2017 estimate reflects general market trends and expectations for health care costs across a variety of expenses an individual could face in retirement, including expenses for Medicare premiums, copayments and deductibles, as well as out-of-pocket expenses for prescription drugs.

With health care costs continuing to be one of the largest expenses in retirement, pre-retirees who haven’t already started factoring the costs into their retirement should do so, Fidelity advises. “The sticker shock of this estimate hopefully reinforces for many people that they need to act now, regardless of their age,” says Adam Stavisky, senior vice president of the Benefits Consulting business at Fidelity Investments. “Rising health care expenses are forcing people to rethink important financial and health decisions now more than ever, ranging from the services they use to the age they choose to retire.”

More Employers Offering HSAs

With this in mind, employers increasingly are taking on a more active role in helping employees manage health care expenses during their pre-retiree years, as well as providing benefits to address health care costs in retirement, the article notes.

Fidelity has found that an increasing number of companies are offering HSAs as part of their benefits platform, with the number of clients on Fidelity’s HSA platform increasing 38% in the last year and the number of individual Fidelity HSA holders increasing 46%.

Fidelity suggests that people enrolled in high-deductible health plans paired with an HSA should consider opening an account to pay for current and future medical expenses. The article highlights the triple tax advantages of HSAs, further noting that a key step in maximizing the value of HSAs is ensuring that employees are investing their contributions.

Moreover, the article emphasizes that contributions not spent each year can be carried over and invested to help pay for health care in retirement, and the accounts are portable when changing employers.