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A retiree leaving the workforce in 2023 can expect to spend the same amount of money on healthcare during retirement as someone who retired last year — the first time that estimate has remained flat year-over-year in about a decade — but that doesn’t mean the cost of medicine and doctor services hasn’t increased.
A 65-year-old retiring in 2023 may spend an average of $157,500 for health and medical expenses throughout his or her retirement (and $315,000 for a couple retiring this year), according to Fidelity Investments, which tracks retiree healthcare expenses annually. That figure assumes the retiree has Medicare Parts A, B and D, and does not include long-term care costs.
The cost of healthcare in retirement for a single retiree was $80,000 in 2002, Fidelity found.
Healthcare costs have continued to rise, however, said Hope Manion, senior vice president and chief actuary at Fidelity Workplace Consulting. The estimate only remained flat because provisions under the Inflation Reduction Act targeting Medicare have offset the rising costs of healthcare, she said. “The benefits are helping,” Manion said.
The Inflation Reduction Act will help older Americans save on medical bills, such as negotiating drug prices, limiting insulin costs and capping out-of-pocket expenses in the coming years.
Retirees, near-retirees and young workers decades out from retirement should continue to be vigilant in saving for their healthcare costs in retirement, and prepare for those expenses, Manion said. “The big picture message here remains: it is still a lot of money,” she said.
One way to save is through a Health Savings Account, which allows investors to contribute, invest and withdraw money tax-free when used for qualified medical expenses. HSAs are not an option for everyone, though — some workers do not have access to this type of account at their jobs, while for others it may be unaffordable since they’re tied to high-deductible health plans.
Savers have underestimated their medical expenses in retirement. In a 2022 Fidelity survey, Americans said they expected a couple to spend $41,000 on healthcare.
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