Thursday, March 25, 2010

Health care costs in retirement: An update

Today, Fidelity Investments reported an updated study showing that a 65-year-old couple retiring this year will need a quarter of a million dollars to pay for medical expenses throughout retirement, not including nursing-home care. The Boston-based investment company surveyed 376 married individuals, 65 and older who were not working full-time to "better understand their experiences in financing health care needs in retirement." The Health Care Costs Estimate found that 47 percent of the retirees are paying more for insurance premiums and out-of-pocket health care costs than they had anticipated. Only three out of 10 had saved specifically for health care needs before retirement, Fidelity said. So what does this mean for a Sixty and Single woman? Our costs could even be higher than that of the marrieds, say experts.
Here's what the Fidelity study said:
- Health care costs averaged $535 a month or about one-fifth of an average couple's monthly expenses of $2,842.
- Among those surveyed, 11 percent said their health care costs are $1,000 a month or higher.
- Average health care costs ranked second to the largest expense, food, which averaged $659 a month and slightly higher than housing related costs, which averaged $494.
“In the past, retirees relied on their former employers to provide health care coverage, but this is no longer something to which most of today’s retirees have access,” said the report. The annual health care costs estimate is calculated by Fidelity’s Consulting Services business, which helps mid- to large-size employers assess and design their workplace benefits programs. For the report, click here.  “It’s crucial," said Fidelity experts, "that workers begin to incorporate future medical expenses into today’s retirement plans.” Easiest solution for Sixty and Single women? Keep working and stay with your employer's insurance program.
When asked to identify their single biggest financial concern today, three out of 10 retirees said paying for today’s health care costs and long-term health care expenses such as a nursing home are among their biggest worries. Other financial concerns included paying for daily living expenses such as food, transportation and utilities (17 percent), assisting grown children and grandchildren with their financial needs (10 percent) and paying for housing (7 percent). A little more than a third (35 percent) of retirees said they have no financial worries.
Here's the really bad news, which most of us already know. The Fidelity 2010 retiree health care costs estimate is 4.2 percent higher than last year’s estimate of $240,000 and 56 percent higher than in 2002, when Fidelity first calculated retiree health care costs at $160,000. The significant jump, according to Fidelity, from 2002 to 2010 can be attributed to a number of factors including higher costs of doctor’s visits, diagnostic tests; increased expenses associated with new technology; and general price inflation.
Fidelity Investments is among the world’s largest providers of financial services, with assets under administration of over $3.2 trillion. For more information about Fidelity Investments, visit

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