Are You Ready? Rising Health Costs in Retirement Leave Many Americans Unprepared

The cost of healthcare during retirement is rising, yet many people aren’t preparing for it. A recent report from Fidelity shows that a 65-year-old American retiring this year can expect to spend around $172,500 on healthcare and medical expenses throughout their retirement. This total includes Medicare premiums, copayments, over-the-counter medications, and other services that Medicare does not cover, such as dental and vision care.

The cost for retirement healthcare has increased by 4% from 2024, reflecting a broader trend in the rising costs of medical care for all Americans, which surged nearly 3% last year and over 30% over the last decade according to the Consumer Price Index.

A survey from Fidelity reveals that one in five Americans have never considered healthcare costs when planning for retirement. Additionally, 17% admit they haven’t taken any steps to prepare for these increasing expenses. “Year after year, so many Americans underestimate how much they’ll need to save for healthcare in retirement,” says Shams Talib, head of Fidelity Workplace Consulting. He emphasizes the importance of early planning for a secure financial future.

Fortunately, options exist to help manage these rising costs. Health Savings Accounts (HSAs) offer a way to save for medical expenses while enjoying tax benefits. The popularity of HSAs is on the rise; Fidelity reported a 23% growth in HSA accounts from early 2024 to the end of the year. However, many people remain unaware of this resource. Currently, less than a quarter of Americans contribute to an HSA. Alarmingly, over half of those aged 55 to 64 who are nearing retirement are not aware that HSAs can be beneficial for retirement savings.

As healthcare costs continue to climb, it’s crucial for individuals to educate themselves about available resources and plan accordingly. Not only can this assistance ease financial strain, but proactive planning can also lead to better health outcomes and peace of mind.



Source link