Health Care costs for retired Americans expected to surge next year

Medicare Part B premiums are soaring, pushing health care costs higher

A new estimate from Fidelity Investment released on Monday shows the average 65-year-old couple retiring this year can expect to spend an average of $315,000 in health care and other related medical expenses during their retirement. That’s a sharp increase from last year, when Fidelity projected that most retired couples would spend up an average of $300,000.

Much of the increase this year stems from steeper Medicare Part B premiums for Americans age 65 and older. Medicare imposed a 14.5% increase on premiums for Part B, outpatient coverage, in 2022 – a record high and nearly double that of the national inflation rate of 8.3%.

On a monthly basis, retirees and older Americans are paying $170.10 for Medicare Part B premium, an amount that is typically deducted directly from Social Security checks.

But Americans don’t necessarily expect to spend so much on health care in retirement, and often fail to allocate enough money, Fidelity found. Couples retiring this year anticipate spending just $41,000 on medical expenses – well below the $315,000 average; when survey participants were informed of the much higher figure, they were alarmed and did not feel prepared to cover those costs during retirement.

Even more concerning is that two-thirds of survey respondents actually believe they would need less than $25,000 to pay for health-care related expenses during their retirement.

However, Americans felt much more prepared if they had invested in a health savings account, which lets individuals set aside pre-tax money to pay for qualified medical expenses. The analysis shows that nearly half of HSA holders feel prepared for health care retirement expenses, compared to just 27% of those without an HSA.

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