Retire Well

Don't let health-care expenses derail your retirement

The health-care wildcard

You may think you are financially prepared for retirement, but have you considered your health-care costs?

Fidelity estimates a couple, both age 65 and retiring this year, can expect to spend an estimated $245,000 on health-care throughout retirement. That's an 11 percent increase from last year's estimate of $220,000.

Factors boosting this year's projection include longer life expectancies and anticipated annual increases for medical and prescription expenses. The estimate assumes the retirees are enrolled in Medicare but does not include the added expenses of nursing-home or long-term care.

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Costs may vary significantly between men and women. Longer life expectancies and a compounding inflation rate will lead to females spending more on health care than males.

A 65-year-old woman who lives to 87, for example, can expect to spend $130,000 on health care, compared with $115,000 for a 65-year-old man who lives to 85, according to Fidelity. (Those are the average life expectancies for those who are 65 years old, according to estimates from the Social Security Administration.) The projected costs include Medicare Parts B and D, which cover routine medical and prescription costs, as well as a supplemental insurance policy.

How can you plan ahead for these costs?

Review your needs now

First, it's important to manage health-care costs before you retire. Consider how you use health-care providers. Do you go to the doctor often? Do you have a chronic illness that requires prescription medications? If so, your health-care costs may be higher than average now and in retirement.

Contribute to an HSA

If you can, contribute as much as you can to a Health Savings Account (HSA) before you turn 65. HSAs are a good way to pay for current and future medical expenses through a tax-advantaged account. Money in the account that isn't spent in a given year may carry over to the next and can be invested to help pay for health care in retirement. You must be enrolled in a high-deductible health plan to contribute to an HSA. You cannot contribute to an HSA if you're on Medicare.

Calculate potential costs

Do the math and try to estimate how much you may spend on health-care expenses in retirement. Check out AARP's health-care costs calculator. For the average couple retiring this year, total health-care costs will consume an estimated two-thirds of their lifetime Social Security benefits, according to a recent HealthView Insights report. For the same couple retiring in 10 years, approximately 90 percent will go toward health-care expenses.

And if you're part of the 30 percent of Medicare beneficiaries whose premiums may rise, then your Social Security check will be even smaller, since these premiums are deducted from this benefit. Take a look at your insurance coverage, as well as the average Medicare costs by age, to come up with an estimate. And review your sources of retirement income to see what your retirement picture looks like.

Evaluate insurance options

Pre-retirees reviewing health insurance options may want to consider private insurance programs. Under typical Medicare Advantage plans, retirees pay monthly premiums to a private insurer and in many cases have a higher percentage of claims and prescriptions covered compared to traditional Medicare. This could reduce overall costs over the entire period of a retirement. Just make sure the doctors, specialists, and hospital you want are included in the plan before signing up. Learn more about what questions to ask as you compare coverage options at

Finally — and most importantly — maintaining a healthy lifestyle now and in retirement may be one of the best ways to keep health-care costs in check.