Fidelity estimates a retiree needs $107,500 for health care costs
Rising health care costs are eating up more of retirees’ savings,with a 65-year-old couple retiring this year needing about $215,000 tocover medical costs over the rest of their lives, Fidelity Investmentssaid Tuesday. The $215,000 represents a 7.5 percent increase from Fidelity’sestimate last year of the amount a typical U.S. couple would needduring retirement to pay for health care, including medical andsurgical expenses as well as prescription drugs. That increase is slightly higher than the average annual increase of6.1 percent since Fidelity began calculating retiree health careexpenses five years ago. Since then, the highest increase came in 2005,when the estimate rose 8.6 percent. The cost estimates generally track inflation in health careexpenses. Fidelity, the nation’s largest mutual fund manager and aprovider of retiree financial services, projects health care costs willrise about 7 percent per year. Those costs are rising faster than overall inflation because ofincreasingly expensive medical technologies, costlier prescriptiondrugs and longer life expectancy, said Brad Kimler, senior vicepresident for Fidelity Employer Services Co., a division ofBoston-based Fidelity. Fidelity estimated that 32 percent of the $215,000 estimate _ upfrom $200,000 a year ago _ would be for Medicare coverage premiums forexpenses from doctors’ visits, outpatient hospital care andprescription drugs. Another 35 percent of the expenses would come from othercost-sharing provisions of Medicare, including co-payments anddeductibles. Out-of-pocket costs for prescriptions would account foranother 33 percent.
Note: The estimateassumes retirees have no employer-provided health care coverage.