Retirement Health Costs Skyrocket—Millions of Americans Dangerously Unprepared

Boomers brace for impact as medical expenses outpace savings.

The ticking time bomb

Healthcare inflation isn’t just eating into paychecks—it’s devouring retirement dreams. While Wall Street bets on AI and crypto, Main Street faces a brutal math problem: living longer costs more than anyone planned.

Band-Aid solutions won’t stop the bleeding

Traditional 401(k)s look increasingly like horse-drawn carriages in an ambulance race. The system’s rigged—unless you’re mining Bitcoin or flipping NFTs in your golden years.

Wake-up call or retirement nightmare?

Financial advisors push annuities like they’re going out of style (they are). Meanwhile, decentralized finance offers yield even your grandpa can’t ignore. Too bad he’s still trying to log into his AOL account.

KEY TAKEAWAYS

• The average 65-year-old American can expect to spend about $172,500 on health care and medical expenses throughout their retirement.
• Although health care costs are growing, many Americans have not considered or planned for them.
• Additionally, many Americans are unaware of resources that make health care in retirement cheaper, like Health Savings Accounts.

The cost of health care for retirees keeps climbing, but many people aren't planning accordingly or using resources that can make these expenses more affordable.

A 65-year-old American retiring this year should expect to spend, on average, $172,500 on health care and medical expenses throughout their retirement, according to estimates by Fidelity. That includes premiums for Medicare insurance, as well as copayments, over-the-counter medications, and dental and vision care that Medicare does not cover.

The total cost for retirement health expenses is up 4% from 2024, according to Fidelity. That's on par with medical care cost increases for all Americans, which ROSE by almost 3% from 2024 and by more than 30% over the past decade, according to Consumer Price Index data.

What You Can Do

Yet, a survey from Fidelity found that one in five Americans say they never considered health care when planning for retirement, and 17% have not taken action to prepare for these increasing health expenses.

“Year after year, so many Americans underestimate how much they’ll need to save to cover health care costs in retirement,” Shams Talib, head of Fidelity Workplace Consulting, said in a press release. "Pre-retirees and retirees alike can take greater control of their financial futures by beginning the planning process as soon as possible.”

But there are savings plans that can help with medical costs in retirement. Health Savings Accounts are tax-advantaged savings accounts Americans can use for qualified medical expenses.These health care accounts have grown in popularity; the number of Fidelity HSA accounts grew by 23% from the beginning of 2024 to the end of the year.

Still, many Americans don't know about these programs. Currently, less than a quarter of Americans say they are contributing to an HSA. And over half of 55-to 64-year-olds who are on the verge of retiring told Fidelity in 2023 that they weren't aware that HSAs can be used to save forretirement.