Health-Care Costs Could Eat Up Your Retirement Savings

In a perfect world, the largest expenses in retirement would be for fun things like travel and entertainment. In the real world, retiree health-care costs can take an unconscionably big bite out of savings.

A 65-year-old couple retiring this year will need $275,000 to cover health-care costs throughout retirement, Fidelity Investments said in its annual cost estimate, out this morning. That stunning number is about 6 percent higher than it was last year. Costs would be about half that amount for a single person, though women would pay a bit more than men since they live longer.

You might think that number looks high. At 65, you’re eligible for Medicare, after all. But monthly Medicare premiums for Part B (which covers doctor’s visits, surgeries, and more) and Part D (drug coverage) make up 35 percent of Fidelity’s estimate. The other 65 percent is the cost-sharing, in and out of Medicare, in co-payments and deductibles, as well as out-of-pocket payments for prescription drugs.

And that doesn’t include dental care—or nursing-home and long-term care costs.