Medical Expenses in Retirement
Planning your retirement income strategy usually involves mapping out fixed costs like a mortgage or car payments. However, unexpected medical expenses remain a massive wild card for most couples.
A recent Fidelity report reveals a 65-year-old retiring in 2026 will spend an average of $185,500 on healthcare.
For a married couple, that means you need to account for $371,000. This is just to cover out-of-pocket medical expenses throughout your retirement.
If you are among the 54% of pre-retirees who incorrectly believe Medicare covers everything, this hidden cost could completely disrupt your financial future.
Links for Medical Expenses in Retirement
Catch all our Mullooly Asset videos here
Subscribe to the Mullooly Asset YouTube Channel
Watch this episode (“Medical Expenses in Retirement”) on our YouTube Channel
Fran Walsh CFP on Twitter
Life expectancy at age 65 (see page 2)
Fidelity report
Transcript for Medical Expenses in Retirement
If you and your spouse are planning to retire in 2026, it appears you may need another $371,000.
And you may – or may not – have accounted for this.
Fidelity issued a report this year that shows a 65-year-old person retiring in 2026 should expect to spend an average of $185,500 on healthcare and medical expenses throughout his or her retirement.
For a married couple, that’s $185,500 times two, or $371,000.
You know, most people can map out what’s left on a mortgage.
Or how many car payments they have remaining.
You know, what many of their expenses are going to look like.
But the cost of healthcare, that’s really become a wild card for so many people.
So how did Fidelity come up with this amount?
First, at age 65, there’s an average life expectancy of 20 years.
Someone retiring in 2026 at age 65, the average life expectancy….. according to the tables, is 20 years.
Again, average.
Some people are going to live longer.
Some, not so much.
A portion of this $185,500 per person is the monthly medical expenses that come along with Medicare Part B …..and Part D especially.
That’s a significant chunk of this money in 2026.
Another large part of this $185,500 are other medical expenses.
Things like co-payments, co-insurance, deductibles….. for things like hospital visits, outpatient services.
As well as things that might be excluded.
The first things that come to mind are vision care, eyeglasses, eye exams, hearing aids.
So the rest of the amount comes from items that are simply not going to be covered by Medicare.
Especially what’s not covered under Part D, where you may have to pay out of pocket for certain medicines.
In the midst of pulling all of this together for this video, I found a crazy stat I wanted to share with you.
Fidelity reports that 54% of pre-retirees INCORRECTLY believe Medicare will cover all of their (health) medical expenses.
Think about that.
More than half the people walking around out there — who are getting ready for retirement — think Medicare is going to cover everything.
Please understand: Medicare will NOT cover all of your (health) medical expenses.
Now, the “glass is half full” crowd out there will say,
“Wait, wait, wait, wait, wait…… when you do the math, 20 years, that’s 240 months, that works out to $773 per person. That doesn’t seem so devastating.”
The problem with healthcare costs is they usually don’t happen in straight lines.
And these costs tend to multiply and expand – exponentially – sometimes, the older that you get.
And sometimes the medical expenses happen all at once.
As you build out your retirement income strategy, these kind of costs, although it’s pretty foggy, pretty hazy, and hard to plan for, these things should absolutely not be overlooked.
But hey, what can you do to “tilt the odds” in your favor?
Well, “friend of the firm,” Fran Walsh, he’s a CFP in Bucks County, Pennsylvania….. had a tweet storm recently about this.
We’ll link to it below.
Pat works out all the time.
He’s in great shape.
He built his own gym in his home.
We’ve compared notes about what we can do — as folks get older, to stay in better shape.
This is the part of planning for retirement that so many people just overlook.
So I want to go back to that 20-year life expectancy at age 65.
Some people, because it’s an average, some people are going to live longer.
Um, how could you possibly help yourself?
Well, it’s one thing to be diligent and save.
And financially plan well for retirement.
But if you’re out of shape…..
Or if you’re in poor health,
You won’t be able, or you might not be able to enjoy your retirement.
Fran put it really well:
“There’s two ways retirement can go wrong.
The first is running out of money before you run out of time.”
We talk about that constantly with our clients.
The second way, though, is…..
“running out of health, before you run out of money. It’s just as common, and almost nobody plans for it.”
So look, we can model what your financial picture is going to look like.
But what we can’t model is whether you’re physically going to be able to enjoy it.
I want you to leave a comment below. Tell us what you’re doing to prepare for this financially, but also if you’re doing something physically to get in better shape…… or stay in good physical condition.
And if you’re curious what does a $1 million retirement look like, watch this video next……
