When saving for retirement, most people invest in a 401(k) retirement planthrough their employer without realizing how expensive some retirement costs canbe once they stop working. In fact, one cost that many retirees underestimate ishealth care costs.

Recent data from Fidelity found that a 65-year-old in 2025 will spend an averageof $172,500 on their health care costs and medical expenses in retirement. Forthose living on a fixed income, this number may come as a shock. Here’s moreinformation about health care costs in retirement and what you can do to prepare yourself financially.

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Health care costs are rising year over year

In 2024, Fidelity estimated that health care costs would be on average $165,000in retirement, and back in 2002, the number was $80,000. That means that thosewho are still working today can expect this number to rise even more.

Between 2024 and 2025, the average cost increased 4.5%, so even if you have fiveto 10 years left before retirement, your average health care cost could be evenhigher in retirement.

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The average health care costs don’t include everything

One cost that Fidelity’s data does not include is long-term care costs. If yourequire long-term care, such as a nursing home or memory care facility, yourhealth care costs in retirement could be substantially higher than the average.That’s why it is so important to prepare for this expense in retirement.

Health care costs could be even higher for women

Because women typically live longer than men on average, their health care costsmay be even higher. Research from Milliman’s 2025 Retiree Health Cost Indexprojects found that it would cost men roughly $275,000 and women $313,000 undertraditional Medicare.

These projections were for a healthy person retiring at 65, so those who havehealth issues may face higher costs. If you know that your health care needs willrequire more doctor’s appointments in the future, allocate more savings towardshealth care when preparing a retirement budget.

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These factors are driving health care costs higher

There are a few factors that are driving health care costs higher. First of all,people are living longer, which is requiring a greater need for doctor visits,long-term care, and more.

Additionally, even though inflation is causing many prices to increase oneveryday items, health care is outpacing inflation. According to data from thePeter G. Peterson Foundation, health care costs per capita were up 6.1% in 2024,which is more than the 2.6% personal consumption expenditure price index, whichmeasures inflation on goods and services.

Finally, Medicare premiums are rising. All of these factors combined arecontributing to higher costs in an already expensive health care landscape in theUnited States. This can be incredibly challenging to manage for retiredAmericans who are living on a fixed income.

Health care spending increases once you turn 80

According to RAND data, health care expenses rise once people turn 80, whileother expense categories, such as vacations and leisure, decline. Because ofthat, it’s important to plan for these rising expenses and ensure you’reprepared to support any health care needs you may have later in life.

Sometimes, nursing homes or memory care facilities can cost thousands of dollarsper month for round-the-clock care, which can quickly reduce retirement nesteggs.

Build a dedicated health care budget for retirement

Ultimately, one of the best ways to prepare for health care costs in retirementis to make health care a regular part of your budget. Tracking your spending,reducing high-interest debt, and creating an emergency fund can help you preparefor rising health care expenses as you age.

If you still have a few years before you retire, now is the time to takeadvantage of catch-up contributions and employer matches to ensure that youinvest as much as possible before you stop working. Many retirees struggle withthe transition from a salaried income to a fixed income, so planning ahead canhelp.

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Consult with a financial advisor about your options

If you need help planning a budget and expenses in retirement, consult with afinancial advisor. They can help you decide what types of accounts may optimizeyour health care spending, like an HSA.

They may also be able to give advice onthe most tax-advantaged way to withdraw money from your retirement accounts sothat you’re able to support yourself for many years.

Bottom line

It can be hard to reach your retirement goals whenyou’re worried about rising health care costs. That’s why it’s so important toplan ahead and consult with a financial advisor if you need advice about howmuch you should save.

Because health care costs continue to rise, even outpacinginflation, having a plan for how you’ll pay for it in the future can help bringpeace of mind.

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