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August 09, 2024 at 10:45 AM
What You Need to Know
- A 65-year-old retiring in 2024 can expect to pay about $165,000 for health care and medical expenses in retirement, Fidelity estimates.
- The number, up 4.8% from 2023, is a chance to get clients thinking about Medicare enrollment.
- Actual costs can vary widely by sex and coverage type.
Fidelity Investments is now estimating that a single 65-year-old retiring this year will spend an average of about $165,000 on health care and medical expenses throughout retirement.
The firm’s new Retiree Health Care Cost estimate is 4.8% higher than the estimate it released in 2023, and it’s up from an average of $150,000 for women and $135,000 for men that it posted in 2019. Fidelity did not provide separate estimates in 2024 for men and women.
Most retirees pay for the Medicare Part A inpatient hospitalization program through payroll taxes during their working years. They get the Part A coverage at no additional cost.
The Fidelity estimate does include about $71,000 for Medicare Part B outpatient care and physician services program premiums and Medicare Part D prescription drug plan premiums; $78,000 for co-payments, deductibles and coinsurance amounts; and $16,000 for out-of-pocket drug premiums.
Fidelity quoted Harold Stankard, head of its Fidelity Medicare Services business, emphasizing the complexity of Medicare coverage choices.
“For those approaching Medicare eligibility, or even those already in retirement, understanding how the options available can support individual needs is an important step in simplifying a strategy,” Stankard said.
What it means: Some financial advisors are not especially interested in Medicare.
Their clients are, and Fidelity is keenly interested in helping advisors use Medicare information to start conversations with their clients and prospects.
Planning tips: When Fidelity unveiled its retirement health care cost estimate in 2019, it included a list of tips for pre-retirees. One of the recommendations was that pre-retirees learn about Medicare supplement insurance and Medicare Advantage plan options.
This year, Fidelity encourages consumers to consider using a health savings account to save for post-retirement health care expenses and to visit its website to learn about Medicare plan options.
Estimate details: Fidelity does not go into much detail about how it calculates the retirement cost estimate, but it notes that it starts with life expectancy assumptions based on the Society of Actuaries’ RP-2014 Healthy Annuitant rates projected with Mortality Improvements Scale MP-2021 as of 2022.
The estimate is net of taxes.
