Retirees Will Spend $172,500 on Average Just for Health Care — So Start Saving Now

Many of us imagine retirement as a magical time, when we can sit back, relax and enjoy a well-earned break after years of putting in work. However, that kind of time off requires some up-front financial planning and, ideally, a lifetime of saving — especially since many older Americans face high health care costs that are, unfortunately, climbing even higher.

Case in point: According to Fidelity's 24th annual Retiree Health Care Cost Estimate, which was just released in late July, the average cost of medical and health care expenses during retirement reached a whopping $172,500 — a 4% year-over-year increase since 2023.

What’s worse, the same study found that 17% of Americans, or nearly 1 in 5, have taken no action whatsoever when it comes to planning for health care costs during retirement.

Fortunately, if you’ve still got some time between you and your retirement years, this is a trend you have the opportunity to get ahead of.

Americans don’t have enough saved for retirement — even before rising health care costs

Fidelity’s study — and its resulting estimated figure — assumes a 65-year-old retiring today, in 2025. That person can expect to spend about $172,500 on health care and medical expenses over the course of their retirement.

That estimate also assumes that the retiree is enrolled in Original Medicare (both Part A and Part B) as well as Medicare Part D, its voluntary prescription drug coverage program. The estimated figure includes out-of-pocket costs for medical care and prescription drugs such as premiums and co-payments, but it does not include long-term care expenses — which could easily drive the figure even higher.

Fidelity’s study also finds that fully 1 in 5 Americans have never even considered their health care needs (and related costs) during retirement, a statistic that balloons to 1-in-4 among Gen X survey respondents. And even for those who have considered these expenses, many have yet to make moves to meet it: Across all generations, 17% of Americans agree they’ve “taken no action at all when it comes to planning for health expenses in retirement.”

And, of course, those expenses are just getting pricier all the time, with a 4% increase year-over-year since 2023. Add in the fact that, according to a separate study by Prudential, 55-year-old Americans have a median of less than $50,000 in their retirement funds and, well — the deficiency is concerning.

What can you do now to get ready for medical expenses in retirement?

Although the statistics are undeniably grim, the good news is, a little bit of planning today can go a long way when it comes to retirement — especially if you’ve still got 10 years or more to go before the day you hope to clock out for the last time.

Making regular contributions to your retirement fund — especially up to the match amount, if you work at a company that offers one — can help get you on the right track for all your retirement expenses, including health care related costs. Just be sure to allocate the funds so they go to work and get growing.

If you work for yourself or your company doesn’t offer a 401(k) or similar account, an individual retirement account (IRA) can help you meet your retirement goals. And if you want to contribute more than their relatively low minimums, looking into a product like a SEP IRA can help you make the heftier contributions you may need to catch up if you haven’t saved much for retirement so far.

Finally, when it comes to preparing for health care related costs specifically, choosing a plan that allows you to carry an HSA can go a long way. Health savings accounts or HSAs allow you to save money for medical expenses in a triple-tax-incentivized way: Contributions to your HSA are tax-deductible, grow tax-deferred and are tax-free when withdrawn for qualified health-related expenses.

Plus, unlike the funds in a flexible savings account (FSA), the money in your HSA is yours forever — which means the dollars you save today will still be available to you in retirement. (You will, however, need to choose a High Deductible Health Plan, or HDHP, in order to qualify for an HSA.)

Additionally, once you do reach retirement age, choosing the best Medicare coverage options for your needs can help you save money — as can shopping around for the most affordable Medicare Advantage plan, if you’re going that route.