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Health Care Costs Down, but Still "Daunting": Study

“It is extremely important that health care costs are factored into retirement savings strategies today."

| BY Donald Liebenson


That is the estimated tab a 65-year-old couple retiring this year will need to cover medical expenses throughout their retirement, according to a new study conducted by Fidelity Benefits Consulting.  That $220,000, by the way, does not include nursing-home care and applies only to retirees with traditional Medicare insurance coverage.

On the plus side, this represents an 8 percent decrease from 2012, but it is still a “daunting” figure that “will consumer a considerable amount of a couple’s retirement savings,” Brad Kimler, executive vice president of Fidelity’s Benefits Consulting business, in a statement. “It is extremely important that health care costs are factored into retirement savings strategies today so that retirees can be prepared to pay their medical bills throughout retirement.”

Related story: High net worth: Health care costs threaten my retirement.

Retirees now spend more on health care than they do on food, another Fidelity study found, a trend that, if continued unabated, will make health care a retiree’s second-largest expense (after housing)  in just a few years.

Previously, Fidelity’s health care cost estimate had decreased only once. In 2011, it declined $20,000 due to a one-time adjustment driven by Medicare changes that reduced out-of-pocket expenses for prescription drugs for seniors, Fidelity noted.  The estimated decrease this year is attributed to lower-than-expected Medicare spending in recent years, as well as a reduction in projected Medicare spending in the near-future.

The Fidelity study attributes the decreased Medicare spending to several factors, including the 2008 economic downturn, which forced many to cut back on seeking medical services, and demographic changes that are bringing a large influx of younger enrollees into the Medicare population as baby boomers retire. “Younger retirees tend to have lower health care expenses,” the study observes.

A worrisome finding of the study in regards to retirement planning is that consumers are greatly underestimating the amount of savings they may need to cover their health care costs. A recent poll of preretired baby boomers ages 55-64 found that nearly half (48 percent) believe they will need only $50,000 to pay for health care costs in retirement.

Related story: Sluggish economy constrains health care spending

Related story: Affluent households “terrified” at prospect of health care costs in retirement

About the Author

Donald Liebenson

Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.  

A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.