Paying for health care in retirement By Robert Powell, MarketWatch Last Update: 1:39 PM ET Mar 9, 2006
BOSTON (MarketWatch) -- Ice floe anyone? A 65-year-old couple retiring today will need on average a tidy $200,000 set aside to pay for medical costs in retirement, according to an annual Fidelity Investment study released this week. Of course, as with any study, the devil is in the details. For instance, Fidelity's estimate, which assumes that Americans do not have employer-sponsored retiree health care, includes expenses associated with Medicare Part B and D premiums ($64,000), Medicare cost-sharing provisions such as co-payments, coinsurance, deductibles and excluded benefits ($72,000), and prescription drug out-of-pocket costs ($64,000). Fidelity's numbers do not include other health expenses, such as over-the-counter medications, most dental services and long-term care. "It doesn't look hopeful," said Paul Fronstin, a senior research associate with the Employee Benefit Research Institute in Washington, D.C. and fellow at TIAA-CREF Institute whose research shows medical costs in retirement to be even higher. "It's a massive problem especially in light of what happens to Medicare over the next 14 years." To be sure, not all retirees will need as much as Fidelity's or Fronstin's research suggests. For instance, some retirees, though fewer and fewer, will have retiree health care coverage from their former employer. Others, however, especially those who may need to use a nursing home or who live past age 85, (which is the life expectancy Fidelity used to calculate the present value of medical care costs), may need even more than $200,000 set aside. But no matter whether you need more or less than $200,000, Fronstin and others say the fact remains that retirees will need lots of money to pay for medical costs in retirement. ... Robert Powell is editor of Retirement Weekly -- a service of MarketWatch, author "20 Tips for Retirement Investors," and co-author of "Decoding Wall Street." He is also developing two personal finance series for public televisio -- Jim Devine / "There can be no real individual freedom in the presence of economic insecurity." -- Chester Bowles
