Fidelity Investments® Releases 2024 Retiree Health Care Cost Estimate as Americans Seek Clarity Around Medicare Selection

By: Fidelity Investments via Business Wire

August 08, 2024 at 06:00 AM EDT

A 65-year-old retiring today could spend $165,000 on health care in retirement.

50% of Americans approaching retirement¹ expect to feel overwhelmed or confused about selecting Medicare coverage.

Fidelity Medicare Services^® offers impartial guidance to Americans in all 50 states.

Fidelity Investments^® today shared its 23^rd annual Retiree Health Care Cost Estimate, revealing that a 65-year-old retiring this year can expect to spend an average of $165,000 in health care and medical expenses throughout retirement². Fidelity’s 2024 estimate is up nearly 5% over 2023 and has more than doubled from its inaugural estimate in 2002.

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“Health care costs are among the most unpredictable expenses, especially when it comes to retirement planning,” said Robert Kennedy, SVP, Workplace Consulting at Fidelity. “As we approach the fall open enrollment period for health care benefits, it’s a great time for Americans to be proactive with their financial planning efforts. The best time to plan for those health care costs is long before they occur.”

Designed to inform Americans about the importance of incorporating health care costs into retirement planning, this year’s estimate continues the decades-long upward trend of health care costs. Despite this, there continues to be a disconnect for many Americans between the actual projected costs and how much they believe they will spend on health expenses in retirement. In fact, recent Fidelity research finds the average American estimates costs will be about $75,000— less than half of Fidelity’s calculation³.

“There is always opportunity to provide education around the cost of health care and the tools Americans have at their disposal to manage those expenses,” said Kennedy. “For Americans approaching retirement, understanding Medicare options and how they fit into your plan is a good first step.”

Fidelity’s estimate assumes an individual is enrolled in traditional Medicare—both Part A and Part B—which covers most hospital care and doctor visits. However, things like Medicare premiums, prescription drugs, dental and vision care, and all other health care costs that Medicare typically does not cover are left to retirees to manage on their own.

Planning for health care costs

Making a plan to cover health care costs in retirement can feel daunting, particularly as Americans balance competing priorities in day-to-day household budgets. There are a number of drivers behind this mounting retirement health care cost challenge—people are living longer, and health care inflation continues to outpace the rate of general inflation— so it's no surprise health care is creating a gap for many Americans. There are several simple steps investors can take to become better prepared for future costs while managing today's expenses, however, including exploring the utility of health savings accounts (HSAs), which give Americans enrolled in HSA-eligible health plans a tax-advantaged way to save for short- and long-term health expenses.⁴

Enrolling in Medicare: making the right choices can be more cloudy than clear

When it comes to selecting Medicare coverage, many Americans approaching retirement age¹ are concerned that it’s easier said than done. In fact, 55% say it will be difficult to enroll in Medicare coverage, and half expect to feel overwhelmed or confused when selecting their plan.⁵

“As Americans wrestle with the impact of rising health care costs today, it’s understandable that preparing for health care costs in retirement would be a top concern,” said Harold Stankard, head of Fidelity Medicare Services^®. “We’ve heard directly from our clients that choosing health coverage in retirement is one of the most complex decisions they face. 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.”

Despite the desire for greater clarity, the effort it takes to do the necessary research can be a challenge. Notably, while nearly two-thirds (63%) of older Americans¹say they plan to review their Medicare options annually, Americans ages 75 and over are the least likely to review their coverage each year, despite shifting health conditions⁵.

Fidelity Medicare Services^® helps Americans at any stage in their Medicare journey

Whether enrolling in Medicare for the first time or looking for coverage to better meet their needs, Fidelity Medicare Services^® was introduced to provide clarity around Medicare with complimentary advice for Americans to help them support their health and financial goals.

As of July 22, 2024, Fidelity’s impartial guidance is available to residents of all 50 U.S. states and Washington, D.C. Fidelity Medicare Services^® offers the following resources for Americans approaching retirement, and for those who are already retired:

Visit the online learning center: From Medicare basics to interactive tools and in-depth articles help guide the Medicare journey.
Work with a Fidelity licensed insurance agent: For ongoing guidance and support, schedule time to talk.
Compare options: Browse and enroll in Medicare plans online, which can help save valuable time when it comes to choosing the right plan for their needs.

About Fidelity Investments

Fidelity’s mission is to strengthen the financial well-being of our customers and deliver better outcomes for the clients and businesses we serve. Fidelity’s strength comes from the scale of our diversified, market-leading financial services businesses that serve individuals, families, employers, wealth management firms, and institutions. With assets under administration of $14.1 trillion, including discretionary assets of $5.5 trillion as of June 30, 2024, we focus on meeting the unique needs of a broad and growing customer base. Privately held for 78 years, Fidelity employs more than 75,000 associates across the United States, Ireland, and India. For more information about Fidelity Investments, visit https://www.fidelity.com/about-fidelity/our-company.

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Investing involves risk, including risk of loss.

The information provided here is general in nature. It is not intended, nor should it be construed, as legal or tax advice. Because the administration of an HSA is a taxpayer responsibility, customers should be strongly encouraged to consult their tax advisor before opening an HSA. Customers are also encouraged to review information available from the Internal Revenue Service (IRS) for taxpayers, which can be found on the IRS Web site at www.IRS.gov. They can find IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, and IRS Publication 502, Medical and Dental Expenses (including the Health Coverage Tax Credit), online, or you can call the IRS to request a copy of each at 800.829.3676.

Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.

Fidelity Medicare Services^® is operated by Fidelity Health Insurance Services, LLC (“FHIS”), and FMR LLC (“FMR”) is the parent company of FHIS. Unless otherwise indicated, the information and items published in this document are provided by FHIS for informational purposes only and are not intended as tax, legal, or investment advice.

We do not offer every plan available in your area. Currently we represent at least four organizations which offer at least five products in your area. Please contact Medicare.gov, 1-800-MEDICARE, or your local State Health Insurance Program to get information on all of your options.

Fidelity Medicare Services is operated by Fidelity Health Insurance Services, LLC (“FHIS”), and FMR LLC (“FMR”) is the parent company of FHIS. Unless otherwise indicated, the information and items published in this document/website are provided by FHIS for informational purposes only and are not intended as tax, legal, or investment advice.

Fidelity Medicare Services (“FMS”) and Fidelity Brokerage Services LLC (“FBS”) are separate business entities. FMS is not a product or service of FBS. Other than certain demographic information such as name, address and date of birth, the information you provide to FMS or FBS will not be shared with the other entity. Therefore, if you want FBS to consider the information you have provided to FMS in your investment planning with FBS, you must separately provide that information to FBS.

The services described are provided by FHIS. In this capacity, FHIS acts as an insurance broker or agent (collectively referred to as a “Producer”). FHIS and its representatives are appropriately licensed in all states in which they conduct business.

FHIS and its producers are certified representatives of insurance carriers that provide Medicare Supplement insurance as well as are certified representatives of Medicare Advantage (HMO, PPO and PFFS) organizations (and stand-alone prescription drug plans) with a Medicare contract.

The insurance products are issued by third-party insurance companies, which are unaffiliated with FHIS and FMR.

FHIS earns a commission paid by the insurance company based on your enrollment in a health plan. FHIS agents and representatives are not compensated based on your enrollment in a health plan and do not receive commissions from third-party insurance companies.

ATTENTION: Medicare has neither reviewed nor endorsed the information in this document/website. Fidelity Medicare Services, FHIS, and FMR are not connected with or endorsed by the U.S. government or the Centers for Medicare & Medicaid Services.

For a complete list of available plans, please contact 1-800-MEDICARE (TTY users should call 1-877-486-2048) 24 hours a day/7 days a week or consult www.medicare.gov.

This may be considered an advertisement or solicitation for insurance.

Fidelity Health Insurance Services, Corporate Trust Center, 1209 Orange Street, Wilmington, DE 19801

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900 Salem Street, Smithfield, RI 02917

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900 Salem Street, Smithfield, RI 02917

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245 Summer Street, Boston, MA 02205

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¹ Americans approaching retirement defined as ages 50-64

² This estimate is based on a single person retiring in 2024, 65-years-old, with life expectancies that align with Society of Actuaries' RP-2014 Healthy Annuitant rates projected with Mortality Improvements Scale MP-2021 as of 2022. Actual assets needed may be more or less depending on actual health status, area of residence, and longevity. Estimate is net of taxes. The Fidelity Retiree Health Care Cost Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, original Medicare. This calculation takes into account Medicare Part B base premiums and cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by original Medicare. This estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care.

³ Fidelity Health Solutions Thought Leadership Employer Health Benefits Blueprint, 2023

⁴ With respect to federal taxation only. Contributions, investment earnings, and distributions may or may not be subject to state taxation.

⁵ This CARAVAN study presents the findings of a survey among a sample of 2,009 U.S. adults ages 50+. Interviewing was conducted on June 27-July 2, 2024 by Big Village, which is not affiliated with Fidelity Investments. The results may not be representative of all adults meeting the same criteria as those surveyed.