Fidelity estimates that a 65-year old couple retiring today will need $200,000 to cover medical costs in retirement.It's also mentioned that most dental and long term care isn't included in this estimate.
The retiree health care cost estimate is calculated annually by Fidelity Investments. The 2006 estimate rose 5.3 percent from the 2005 estimate of $190,000. Since Fidelity's initial estimate of $160,000 in 2002, the number has increased an average 5.8 percent per year.
In a related article, Fidelity says, in part:
US Department of Health and Human Services estimates that about 40% of people aged 65 or older have at least a 50% lifetime risk of entering a nursing home. The average stay is 2.4 years, and those with debilitating illnesses such as Alzheimer's or Parkinson's could require full-time care for much longer. In 2004, the average daily rate for a private room in a nursing home was $192 or $70,080 annually, but costs vary significantly from state to state.So, health care in one's later years is likely to be a significant cost. The other companion observation is that fewer companies are offering retiree health benefits. The Fidelity article says:
America is experiencing a double digit decline in the number of companies offering retiree health benefits to their employees
The Fidelity article uses as a source the Kaiser Family Foundation and the Health Research and Educational Trust 2005 Annual Employer Health Benefits Survey 9/14/2005. I didn't review the Kaiser report in fine detail, but I didn't see this observation in the report. The report transcript does say on page 4 that:
Since 2000 the percentage of firms offering coverage has fallen from 69% to 60%.But the Kaiser report didn't differentiate, as far as I could tell, between regular employee and retiree health care benefits. A more careful reader might agree with the Fidelity interpretation.
- a lot of post retirement income and savings will go to health care
- long term care issues will affect 50% of the population
- companies have been reducing or eliminating health care benefits for at least their retirees, if not both the regular work force as well as retirees.