Medical Expense Projection

CMS National Health Expenditure data shows healthcare inflation averaged 4.5-5.5% annually over the past decade - nearly double general CPI. Plan projections should use 5-6% medical inflation, higher than the 2-3% used for general expenses.

Fidelity's 2024 Retiree Health Care Cost Estimate is $165,000 per person for a 65-year-old retiring in 2024 (excluding long-term care). Couples should plan for $330,000+ over retirement.

No. Medicare Parts A & B cover about 80% of approved services. Beneficiaries are responsible for premiums, deductibles, copays, and uncovered services like dental, vision, and most long-term care. Most enrollees add Medigap or Medicare Advantage.

New technology (gene therapies, monoclonal antibodies), an aging population that drives up demand, a lack of competitive pressure in many regional hospital markets, and the steady approval cycle of high-cost prescription drugs. Historically it averages 4-5% a year, well above general CPI.

Three tax advantages: contributions are deductible going in, growth is tax-free, and withdrawals are tax-free for qualified medical expenses at any age. It is the only vehicle with that triple structure. After 65, you can also withdraw for non-medical expenses paying ordinary income tax (no penalty), just like a traditional IRA.

Raise the health status to "fair" or "poor" (a 1.3 or 1.6 multiplier) and use a higher medical inflation rate (5-6%). Chronic conditions like diabetes, heart failure, or COPD can easily double your baseline spending.