Whenever we talk about people’s biggest fears in retirement, two things always jump out: the fear of running out of money and health care costs.
Well, a new analysis from Fidelity Retiree Health Care Cost Estimate says a 65-year-old couple retiring in 2016 will need an whopping $260,000 to cover health care costs in retirement. That’s up 6 percent from last year and the highest estimate since the company began calculations in 2002, Fidelity says.
It was $220,000 in 2014 and $245,000 last year. It’s based on a life expectancy of 85 for men and 87 for women. The breakdown of those costs:
- 36 percent for monthly expenses associated with Medicare Part B and D premiums.
- 40 percent for Medicare cost-sharing provisions, including co-payments, co-insurance and deductibles.
- 24 percent of the costs are associated with prescription drug out-of-pocket expenses (including co-pays and amounts not covered by Medicare Part D)
Also, Fidelity for the first time examined the costs associated with long-term care, which it says could impact seven in 10 Americans who reach 65 in the next five years. Fidelity estimates that a 65 year old would need an additional $130,000 to insure against long-term care expenses. That assumes that the couple is in good health and buys a policy with an $8,000 maximum monthly benefit. Keep in mind that most experts recommend also that a couple buys long-term care insurance before they turn 65, when rates are much cheaper.
Adam Stavisky, senior vice president of Fidelity Benefits Consulting, says the increases can be attributed to increased use and rapidly increasing drug costs. Those costs are going up partly because the introduction of generic drugs has slowed, he said.
Stavisky says Fidelity hopes that the latest numbers are a clarion call to people to be aware of the financial risks of health care costs.
For many, he says, the costs will be one of the biggest financial obligations they take into retirement. “Being aware of those obligations is critical.” And he says employers are also increasing their efforts to make their employees understand these types of obligations.
To read more:
Question of the week: Are you making provisions for health care costs in your retirement? Send comments to firstname.lastname@example.org. Please include your name, city and state. In the subject line put “Worried about health care.”
Last week’s question: Are you stressed about your retirement? What is you biggest worry?
Patricia Young of Washington wrote:
YES, I’m stressed about retirement. I have saved a considerable amount through the Thrift Savings Program, which I joined as soon as I became a federal employee. My husband is a former federal employee and since losing his job over 10 years ago, he has not worked steadily or saved for retirement. This stresses me out tremendously and even though I have spoken with him about it on numerous occasions, it doesn’t seem to bother him that he has spent his prime earning years tinkering instead of being gainfully employed and contributing to a retirement account. He does have his Civil Service retirement and a small amount in TSP, but there could be so much more money in the account to ensure that we have a comfortable retirement instead being in the position of just getting by. I’m afraid there won’t be enough money to live comfortably or last until, you know, THE END. So yeah, this makes me toss and turn and lose sleep on occasion, because I don’t see a solution.
John Hoover of Avon, Ind.:
I have no regrets about my retirement. I started early, stayed consistent and was lucky to have several big run-ups in the stock market during my growth years. I was also lucky that “timing” had me 100% out of the stock market prior to 1991.
My regret is that I was not able to get the “start early, stay consistent” message to my children (ages 31 and 36). They both have only recently started saving for retirement. I hope that the longer time on the job that they should have due to increasing longevity and therefore longer work life will allow them the same comfortable retirement I now enjoy.
Carl of Marietta, Ga.:
The stress in retirement for me and my brother and sister is health cost. We have saved well but unknown health cost is what is scary.
Rebecca Roush of Seattle, Wash.:
Five years from planned retirement at 62. Mildly stressed because of unknowns:
- Will I need the average ($250-400K) for medical costs throughout retirement?
- Will I be savvy enough about tax implications when it’s time to withdraw from 401(a), 457 and IRA retirement accounts?
- What happens to my investments if Trump is elected, and bumps in the economy in general?
- Am I stupid for not having long-term care insurance?
My most recent retirement columns:
Michelle Singletary’s Color of Money Columns
Write Brooks at The Washington Post, 1301 K St. NW, Washington, D.C., 20071, or email@example.com. On Twitter @Perfiguy. Personal responses may not be possible, and comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read more, go to washingtonpost.com/business