US retiree health care to cost $200,000: Fidelity

NEW YORK (Reuters) – Fidelity Investments, the No. 1 mutual
fund firm, said on Monday that an American couple that retires
at age 65 will, on average, need $200,000 in retirement to
cover out-of-pocket medical costs.

That amount, considered the biggest single expense for most
people in retirement, increased 5.3 percent from $190,000 last
year, said Brad Kimler, a senior vice president of Fidelity
Employer Services Co., a company division.

The increase mostly resulted from the rising cost of health
care and has gone up an average 5.8 percent a year since
Fidelity began releasing the estimate in 2002, the company
said.

The number is important as Fidelity has found that most
people don’t take into account health care when planning for
their retirement, and because the number of companies offering
health benefits to retirees is declining, Kimler said.

Health-care costs have the potential to significantly erode
retirement savings, he said.

“This is the one most frequently overlooked by people when
they’re doing their retirement planning,” he said.

The amount people will need in retirement to cover
out-of-pocket health costs will vary because of the medical
needs they may encounter, he said. Being healthy before
retirement will likely lesson medical costs later, he said.

The estimate for health-care costs assumes that retirees do
not have employer-sponsored retiree health care, but includes
three typical costs: expenses associated with Medicare part B
and D premiums, Medicare cost-sharing provisions —
co-payments, coinsurance, deductibles and excluded benefits —
and prescription drug out-of-pocket costs.

It does not include other health expenses, such as
over-the-counter medications, most dental services and
long-term care.

Fidelity didn’t provide a number for individuals. The cost
for males and females varies.