What health care really costs in retirement

Health care is one of the largest and least predictable expenses physicians will face after they stop practicing. Fidelity Investments’ 25th annual Retiree Health Care Cost Estimate puts the figure at $185,500 for a 65-year-old retiring in 2026, a 7.5% jump from last year’s estimate. Fidelity attributes the increase to rising prices for care, greater use of health care services and growing costs tied to chronic conditions.

That number assumes enrollment in Original Medicare and Part D. It covers premiums, copays, deductibles and out-of-pocket prescription costs. It does not include long-term care, which can add hundreds of thousands of dollars for retirees who need it. Many pre-retirees also overestimate what Medicare will pay for, and that gap can leave even high earners underprepared.

The good news is that physicians have tools to close the gap. Chief among them is the health savings account, which offers tax advantages on contributions, growth and qualified withdrawals, and which Medical Economics has covered as a way for physicians to supplement retirement income. Planning early, accounting for income-based Medicare surcharges and deciding how to fund long-term care can all keep health care costs from derailing retirement plans.