Healthcare Costs in Retirement Climb Higher in 2025, Fidelity Reports

As healthcare expenses continue to climb, a new report from Fidelity Investments underscores the growing financial burden retirees face. According to the firm’s latest Retiree Health Care Cost Estimate, a 65-year-old couple retiring in 2025 can expect to spend approximately $172,500 on healthcare during retirement — a 4% increase over last year and more than double the projected cost when Fidelity first issued the estimate in 2002.

The rising costs arrive at a time when many Americans are expressing concern about their retirement preparedness. One in five say they’ve never factored healthcare into their retirement planning, and 17% have taken no steps at all to prepare for these expenses. As confidence wanes, the need for financial planning and education becomes even more critical.

“Year after year, so many Americans underestimate how much they’ll need to save to cover healthcare costs in retirement,” said Shams Talib, head of Fidelity Workplace Consulting. “With the right tools and guidance, pre-retirees and retirees alike can take greater control of their financial futures.”

HSA Usage Grows — But Education Lags Behind

While healthcare costs are increasing, so is the adoption of health savings accounts (HSAs). Fidelity reports a 43% surge in HSA assets and a 23% rise in new accounts in 2024. Yet awareness and usage remain low: only 23% of Americans are actively contributing to an HSA for retirement healthcare, and fewer than one-third are investing those funds.

The education gap is particularly stark among pre-retirees. Just 15% of Americans aged 55 to 64 are enrolled in an HSA, and of those, over half (52%) don’t know that the account can be used as a retirement savings tool. “When used strategically, HSAs offer tax advantages and long-term growth potential,” said Steve Betts, head of Fidelity Health. “They can be a powerful resource to offset future healthcare costs.”

Medicare Misconceptions Persist

Fidelity’s research also reveals misunderstandings around Medicare. More than one-third (37%) of Americans expect Medicare to cover the majority of their healthcare costs in retirement, but many remain unaware of the out-of-pocket expenses they will still face — including Medicare premiums, over-the-counter medications, dental and vision services, and long-term care.

As healthcare inflation outpaces general inflation, Fidelity stresses the need for proactive planning. The report concludes that retirees and those approaching retirement must educate themselves on the full scope of healthcare costs and utilize tools like HSAs and Medicare literacy to build a more resilient financial future.

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