Fidelity reveals what you’ll spend on healthcare in retirement

Ensuring a healthy retirement means saving for both expected and unexpected costs — and the bills are going to be high. 

A 65-year-old couple retiring in 2022 can anticipate spending $315,000 in health and medical expenses throughout their retirement, according to Fidelity Investments’ Retiree Health Care Cost Estimate report. Single women are anticipated to spend $165,000 throughout retirement, and men will spend an average of $150,000. 

However, many Americans are not anticipating these costs: Fidelity found that couples expect their spending to add up to $41,000 throughout retirement, nearly $275,000 below the estimate. Sixty-eight percent expect their costs will be less than $25,000. 

“Staying informed on potential future healthcare costs should remain a top factor when planning for retirement,” Hope Manion, senior vice president at Fidelity Workplace Consulting, said in a release. “Healthcare issues can feel unpredictable. However, by planning early and saving consistently, people can put themselves in a much stronger position to retire how and when they want.”

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Seventy percent of people surveyed by Fidelity said they did not feel prepared for their healthcare costs, yet people felt more prepared if they were enrolled in retirement savings tools, like a health savings account. HSAs allow employees to save and pay for medical expenses tax-free, and once an employee retires, the money saved can be used for any expense. 

Currently, 82% of employers offer an HSA, according to Willis Towers Watson, yet these benefits are often misunderstood and underutilized, especially by younger employees. Fidelity found that more than half of employees don’t know they can use their HSA as an investment vehicle, and 44% believe they have to spend all of their money in the account each year, rather than letting it roll over. While this is the policy for flexible spending accounts, HSA funds can be carried over. 

“There continues to be an opportunity for additional education on the power of a health savings account, especially for younger people who likely have decades to save and invest before they retire,” Manion said. “The top healthcare concern for younger people is being able to afford unexpected healthcare costs, meaning an HSA could be an effective way to address this worry and these potential expenses.”

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Beyond HSAs, employees should plan realistically for their retirement expenses, factoring in cost of living, as well as a location that has the health and well-being services they’ll need. Employees should do this homework well before retirement approaches, says Kevin Chancellor, founder and CEO of Black Lab Financial Services.   

“People can position their assets a certain way as they're saving,” he says. “I’ve helped people do that in as little as a few months out, all the way back to 10 and 15 years before they get ready to retire. These are things that retirees think about how am I going to be cared for when I'm done with the fun stuff.”