Count on This in Retirement: High Health Care Costs

The projected amount people will need to meet their health expenses in retirement remains higher than you might think — maybe even the highest cost you’ll face after you stop working. For more than 20 years, Fidelity has estimated how much the average 65-year-old couple will need to cover health care costs throughout their retirement. Here’s how the price tag has changed:

• In 2002, Fidelity estimated total costs at $160,000.
• In 2015, it was $245,000.
• Last year, it hit $315,000.

The annual Fidelity estimate includes costs for Medicare Part B and D premiums — the costs not covered by Medicare Part A — and supplemental insurance. (The estimate does not account for long-term care costs.)

What’s the best way to cover your costs? In addition to traditional Medicare, you’ll most likely want to buy supplemental insurance, either in the form of a Medigap plan — also known as Medicare Supplement Insurance, offered by private insurers — or Medicare Advantage, a plan that includes Part A, Part B, and usually Part D. 

According to the Employee Benefit Research Institute (EBRI), a 65-year-old who has saved $96,000 (if male) and $116,000 (if female) is still going to face a substantial shortfall in meeting the costs of premiums and prescription bills. 

In some cases, EBRI found, a Medicare Advantage plan — some have no premium, whereas Medigap plans always have premiums — may save some people money over  traditional Medicare. But keep in mind, these plans generally have limited provider networks or might require approval before covering certain medications or services.  

For more on how retirees pay their expenses, read our reporter Mary Ellen Cagnassola’s story on income sources in retirement. 

— Jill Cornfield, deputy editor

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