Increasing Costs in Retirement Health Care: Essential Information for You
Retirement planning is crucial, and one of the most significant factors to consider is the cost of healthcare. In 2002, Fidelity Investments estimated the annual healthcare cost for retirees at $80,000. Fast forward to 2025, and the 24th annual Retiree Health Care Cost Estimate by Fidelity Investments projects an individual aged 65 with Medicare to spend approximately $172,500 on out-of-pocket healthcare expenses over their lifetime in retirement.
This figure, which represents a 4% increase compared to the previous year, includes Medicare Parts A and B premiums, deductibles, co-payments, coinsurance, prescription drug costs under Part D, and other medical expenses. However, it does not account for long-term care costs, dental, vision, over-the-counter medications, or anything else Medicare doesn't cover.
The estimate assumes the individual is enrolled in traditional Medicare, which covers most hospital care, doctor visits, and prescription drugs. For 2025 specifically, Medicare Part A hospital deductible is $1,676 with daily coinsurance costs beyond the deductible days. Medicare Part B monthly premium is $185 with a $257 annual deductible for individuals earning less than or equal to $106,000 annually.
Andrew Atkins, CFP, VP, and financial consultant at Fidelity Investments, emphasises that costs associated with co-payments, co-insurance, co-deductibles, doctors, hospitals, Medicare premiums, and prescription drugs are all increasing. He also assumes an inflation rate of 4.9% each year when creating an estimate for out-of-pocket health care costs.
It's essential to plan for these costs, as it's not likely that health care costs will ever come down or even flatten out. To help manage these costs, Atkins suggests carving out some savings, beyond an emergency fund, that is dedicated to health care. Living a healthy life that includes plenty of exercise, a good diet, plenty of sleep and hydration can also help keep costs down.
Unfortunately, one in five Americans never consider their health care needs in retirement, and across all generations, 17% say they haven't taken any actions when it comes to planning for health expenses once they stop working. It's important to start planning early and to be realistic about the costs involved.
In addition to saving for healthcare costs, it's also crucial to understand the intricacies of Medicare and other healthcare systems. Articles on avoiding Medicare myths, prior authorization coming to Traditional Medicare starting in 2026, paying for long-term care, and where to retire for the perfect mix of health and happiness can provide valuable insights.
Lastly, don't assume your costs will drop as you age. Instead, save some of your go-go years' fun money for your slow-go years when your health care costs will likely rise. By planning ahead and being aware of the costs involved, you can ensure a more comfortable and stress-free retirement.
- Retirement planning requires considering the potential cost of chronic diseases, medical-conditions, respiratory-conditions, cancer, and other health-and-wellness concerns, as they can significantly impact an individual's financial situation.
- The cost of health care in retirement extends beyond Medicare coverage, including long-term care costs, dental, vision, over-the-counter medications, and other out-of-pocket expenses.
- Fitness-and-exercise, nutrition, and maintaining cardiovascular-health can help reduce the costs associated with healthcare in retirement by minimizing the risk of chronic diseases and medical conditions.
- Therapies-and-treatments, co-payments, co-insurance, co-deductibles, doctors, hospitals, and prescription drugs are all expected to increase in cost, making it vital to plan and save accordingly.
- Personal-finance management is crucial when planning for healthcare expenses in retirement, including understanding the intricacies of Medicare and other healthcare systems, and carving out savings dedicated to health-related expenses.
- It's essential to avoid common Medicare myths and be prepared for updates such as the introduction of prior authorization in 2026, and to consider where to retire that offers a good balance of health and wellness to ensure a more comfortable and stress-free retirement.
