Serious health problems easily top the list of retiree worries, in large part because they can be a devastating financial drain. But even for healthy retirees medical costs can be substantial.
Not counting the costs of long-term care or most dental and vision, the estimated lifetime toll for co-pays, deductibles and other out-of-pocket healthcare spending will total $245,000 for a 65-year-old couple, according to Fidelity Investments. That’s up 29% in 10 years—and a striking 11% since just last year.
A big reason for the jump is revised mortality tables, which show for the first time that the average newborn will reach age 90. The average 65-year-old woman will reach 88.2 and the average 65-year-old man will reach 86.2, the new tables show. In both cases, two years of life expectancy have been added since 2000. Those years will not be free. Fidelity also estimates that healthcare costs are rising between 4% and 5% a year.
These dollar figures might sound dire, but other estimates of expected retirement healthcare costs are actually even higher. HealthView Services puts the figure at $266,589 for a healthy 65-year-old couple; the cost is a staggering $463,849 for a 55-year-old couple retiring in 10 years. Part of the problem is that only about one-third of large employers today offer retiree health benefits—down from two-thirds 25 years ago, according to Allianz Life Insurance.
Just one in nine pre-retirees is confident they will be able to pay for their retirement healthcare needs, Merrill Lynch found. In the Merrill survey, 72% named health issues as their top retirement concern, compared to 47% that named not having enough money to live comfortably.
To prepare for retirement health costs, Fidelity recommends considering private Medicare Advantage programs that cover many out-pocket expenses. Younger savers might take advantage of high-deductible health plans paired with a health savings account, where they can slowly build tax-advantaged savings for healthcare costs many years from now. Another strategy, if you can afford it, is dedicating an income stream from Social Security or a traditional pension to healthcare costs. And of course there is also the free way to bring future healthcare costs down: eat right and stay fit.