Retired Couples May Need $240,000 for Health Care

retired coupleBOSTON (AP) - Couples retiring this year can expect their medical bills throughout retirement to cost 4 percent more than those who retired a year ago, according to an annual projection released Wednesday by Fidelity Investments.

The estimated $240,000 that a newly retired couple will need to cover health care expenses reflects the typical pattern of projected annual increases. The Boston-based company cut the estimate for the first time last year, citing President Barack Obama's health care overhaul. Medicare changes resulting from that plan are expected to gradually reduce many seniors' out-of-pocket expenses for prescription drugs.

But Fidelity says overall health care cost trends are on the rise again, so it's raising its cost estimate from last year's $230,000 figure.

"As long as health care cost trends exceed personal income growth and economic growth, health care will still be a growing burden for the country as a whole and for individuals," says Sunit Patel, a senior vice president for benefits consulting at Fidelity, and an actuary who helped calculate the estimate.

However, this year's 4 percent rise is relatively modest. Annual increases have averaged 6 percent since Fidelity made its initial $160,000 calculation in 2002.

The projections are part of Fidelity's benefits consulting business. The study is based on projections for a 65-year-old couple retiring this year with Medicare coverage. The estimate factors in the federal program's premiums, co-payments and deductibles, as well as out-of-pocket prescription costs. The study assumes the couple does not have insurance from their former employers, and a life expectancy of 85 for women and 82 for men. The estimate doesn't factor in most dental services, or long-term care, such as the cost of living in a nursing home.

This year's estimate could change significantly. Next month, the U.S. Supreme Court will decide whether to strike down part or all of the 2010 health care law, including its centerpiece requirement that nearly all Americans carry insurance or pay a penalty.

If the ruling requires significant changes, Fidelity may update its estimate, Patel said.

Although its focus is expanding health care access to people under age 65, the law also is intended to benefit many retirees by gradually closing what's known as the 'doughnut hole' coverage gap in the Medicare drug benefit.

But longer-term, retirees' cost savings aren't expected to offset other factors driving expenses up, such as new medical technologies, greater use of health care services, and more diagnostic tests.

Fidelity's findings illustrate the importance of factoring in health care alongside housing, food and other expenses in retirement planning. If medical costs continue to rise faster than personal incomes, many retirees will have to adjust their household budgets so they can cover medical costs, Patel says.

"It's a fixed liability for the majority of folks, and it doesn't vary up or down like food or clothing costs can," he says.

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No way ! remember OBAMA said it would all be FREE, I am sure that is what he said. I will be so glad when he is voted out of office.

May 10 2012 at 1:16 AM Report abuse +2 rate up rate down Reply

So what, once a person spends down, all medical expenses are paid the the goverment (medicaid)---or in the real world, the taxpayer. Looks like the system is designed by the goverment, to strip seniors of all of thier assets before they pass on, so why even try to pass any assets on to your kids?

This seems to be more a problem of what medical care costs, and less about the money avaliable to pay for it.

Just take look at the cost of medical services and drugs in other countries in DOLLARS, any you will find a huge difference------it is the system cost, and not the services cost, where most of the problem is---costs imposed by the system, just cost too much in the USA-----remember-big goverement set the system up, and it was set up to its advanatage.

May 10 2012 at 12:29 AM Report abuse rate up rate down Reply

One way to fix medicare and social security is to elect more democrats. The republicans are in the pocket of the health insurance industry.

May 10 2012 at 12:01 AM Report abuse -2 rate up rate down Reply

Retired from the miitary after 20+ years and looking back, I'm damn glad I had the good sense to stay in.

May 09 2012 at 11:55 PM Report abuse +4 rate up rate down Reply

Not to worry. The death panels will hold down costs for seniors.

May 09 2012 at 11:48 PM Report abuse +1 rate up rate down Reply

We are dadburned if we do and dadburned if we don't. If the healthcare plan is shot down, we have less expensive healthcare cost. Those covered will fall under the employed, medicaid, medicare and the remainder will fall under indigent care of hospitals. If healthcare passes, massive taxes from those working to pay for everyone will be staggering. Quality of healthcare will be a joke. There will be no speciality care. Hospitals will be no more than first aid stations like India, Canada, England. Decisions of our care and meds we need will be determined by cost, not our health. The government will be in control, not our doctors. Sad state of affairs if you ask me.

May 09 2012 at 11:40 PM Report abuse rate up rate down Reply

The way to prepare was to start 20 years ago: do not marry or have kids. Do not live in anymore than a one bedroom apartment and keep lease to a minimum. Move across country to the best jobs with the most compensation. Throw all your excess income after expenses and taxes into stock index funds. By this time you are a multimillionaire. No dependents, but you will pay for your own health care.

May 09 2012 at 11:19 PM Report abuse +3 rate up rate down Reply
1 reply to billtstrong's comment

You're right Billtstrong, and I am proof. I actually started preparing 30 years ago, did not marry or have kids (divorice and kids are both expensive), lived in a one bedroom apt but signed one year leases (better rate), switched to better paying jobs often (alas being female I was always paid less than my male counterparts), maxed the 401K with company-matching funds and invested income after expenses & taxes into stock index funds (why pay fund managers and their staffs). My financial advisor (fee waived due to account balance) claims I could stop working now and would still have multi-millions net even if I live to 92. You gave great advice, too bad many won't adhere.

May 10 2012 at 1:19 AM Report abuse +1 rate up rate down Reply

All you gotta do is pace yourselves, ie. take ur Vitamins, take ur Naps, Keep the Faith, and win money at Casino!...?

May 09 2012 at 10:53 PM Report abuse +1 rate up rate down Reply

Does this mean I can save lots of money by dying early. Opps too late I'm

May 09 2012 at 10:52 PM Report abuse rate up rate down Reply

The part of Paul Ryan's health care cut proposal that you didn't hear about is that any person who is considering retirement will be required to watch or read "Soylent Green."

May 09 2012 at 10:39 PM Report abuse rate up rate down Reply