Rising Healthcare Costs for Retirees
Retirees are confronting substantial six-figure bills for healthcare upon exiting the workforce. A 65-year-old retiring in 2025 can anticipate paying an average of $172,500 for healthcare and medical expenses over the course of retirement.
This figure comes from Fidelity’s 2025 Retiree Health Care Cost Estimate, which marks a 4% increase from the prior year. It reflects the ongoing upward trend in health-related expenses since Fidelity’s initial estimate of $80,000 in 2002.
Lack of Planning Among Respondents
The report reveals a significant concern: 17% of all respondents have done nothing to plan for health expenses in retirement. One in five respondents indicated they never consider healthcare needs during retirement, with that figure rising to about one in four for Gen X individuals.
Details of Fidelity's Estimate
Fidelity's estimate presumes enrollment in Medicare Parts A and B, along with Medicare Part D, covering premiums, co-payments, and other out-of-pocket costs for medical care and prescription drugs.
However, it omits long-term care expenses. Retirees remain responsible for Medicare premiums, over-the-counter medications, dental and vision care, and additional costs like long-term care, according to Fidelity. Some of these can be mitigated through Medicare Advantage plans, though those involve separate monthly premiums.
the rise in healthcare costs is driven by several factors, notably longer life expectancies, as well as a healthcare inflation rate that has outpaced general inflation.
Expert Insights on Cost Drivers and Implications
Despite the challenging numbers, Riggs described Fidelity’s estimate as a crucial wake-up call for all generations. It serves not only as a benchmark for retirement readiness but also emphasizes the need for planning as early as possible, Riggs stated.
Matthew Gregory, planning director for private wealth management firm The Bahnsen Group, noted that people often adopt a hands-off approach during their working years, as a significant portion of costs is deducted directly from their paycheck.
They may overlook the necessity for supplemental coverage beyond Medicare Parts A and B, as well as the reality that Medicare does not cover most long-term care costs. These expenses can accumulate rapidly and serve as a stark reality check, he explained.
Similarly, Riggs pointed out that individuals with employer-provided health coverage often fail to consider how they will manage medical expenses after retiring and losing access to their employer’s plan.
This realization for those nearing retirement might prompt them to reassess if they have saved sufficiently, whether they can achieve their goals with existing funds, or if they need to postpone retirement altogether.
They might also have to accept a lower level of coverage than preferred or rely on family members to address care gaps, Gregory added.
Broader Context of Retirement Concerns
This information follows an AARP study indicating declining confidence in Social Security, a program often viewed as a safety net for retirees by providing a financial base. The data, released earlier this week, shows overall confidence in Social Security fell from 43% in 2020 to 36% in 2025, the lowest since dropping to 35% in 2010.
Steps to Improve Financial Positioning
Amid these findings on retirement preparedness and increasing doubts about long-term financial support, Riggs stressed that individuals can always take measures to better position themselves financially, no matter their stage in the retirement journey.
Riggs advised saving early and utilizing accounts where savings can be invested as effective strategies to build a healthcare nest egg, irrespective of age.
Furthermore, Riggs recommended that employees in HSA-eligible health plans consider a health savings account. The triple-tax advantage of HSAs renders them a flexible tool for saving and paying for health expenses. Contributions are tax-deductible, HSA funds can be spent tax-free on qualified medical expenses, and any investment growth is also tax-free, Riggs explained.
