Fidelity has put together an extensive guide to explain the many health care options available to retirees.
If you are like most Americans, health care is expected to be one of your largest expenses in retirement, after housing and transportation costs. But unlike your parents’ generation, you won’t likely have access to employer- or union-sponsored retiree health benefits. So, health care costs will likely consume a larger portion of your retirement budget—and you need to plan for that.
There are a number of drivers behind this mounting retirement health care cost challenge. In general, people are living longer, health care inflation continues to outpace the rate of general inflation, and the average retirement age is 62 for most Americans—that’s 3 years before you are eligible to enroll in Medicare.
“Health care is creating a ‘retirement cost gap’ for many pre-retirees,” says Steve Feinschreiber, senior vice president of the Financial Solutions Group at Fidelity. “Many people assume Medicare will cover all your health care costs in retirement, but it doesn’t. We estimate that about 15% of the average retiree’s annual expenses will be used for healthcare-related expenses, including Medicare premiums and out-of-pocket expenses. So, you should carefully weigh all options.”