As you read the following keep in mind they are also promoting Health Savings Accounts (HSAs) which are a source of investment business. And remember, this is spending estimated over a thirty-year period. The vast majority of the spending is on premiums, not actual health care costs.
Nevertheless, those planning for retirement must consider their basic annual costs (2021 dollars) of about $389.00 per month (with some variables for age and location). This covers Parts A and B and D Medicare plus Medigap supplemental plan. Individuals with incomes above $88,000 will pay higher Medicare premiums.
This combined coverage nearly eliminates out of pocket health care costs with the exception of prescription drug costs for those using high cost medication. An HSA will come in handy here.
If you are concerned about long term care costs based on your health or family history, that is a entirely different issue.
BOSTON–(BUSINESS WIRE)–Fidelity Investments®, one of the industry’s most diversified financial services firms and a leader in creating dynamic employee benefits programs, today announced its 20th annual Retiree Health Care Cost Estimate.
According to Fidelity, a 65-year old, opposite-gender couple retiring this year can expect to spend $300,0003 in health care and medical expenses throughout retirement. For single retirees, the 2021 estimate is $157,000 for women and $143,000 for men.
This year’s estimate marks a new milestone high, up 30% from 10 years ago when the amount was $230,000, but just 1.7% from 2020 ($295,000) as health care inflation has remained relatively flat over the last few years. Fidelity began measuring in 2002 to build greater awareness of estimated health care costs and the importance of starting to plan and save early to meet those anticipated expenses.
Since then, the estimate has risen a total of 88% (from $160,000). “While this past year has certainly made protecting our health today a priority, we need to do the same when planning for future health care needs,” said Hope Manion, senior vice president, Fidelity Workplace Consulting. “Covering health care costs is one of the most significant, yet unpredictable, aspects of retirement planning.
By providing this estimate for retirees, we want to increase awareness among people of all ages to help them proactively get more engaged in saving and investing, so they can be better prepared in years to come.” Broader awareness is much needed, as 58% of current employees say they have spent little or no time thinking about what they need to cover in retirement. Even among those who have, 50% believe they’ll need just $50,000 or less to meet health care expenses.
Fidelity’s estimate assumes both members of the couple are enrolled in traditional Medicare, which between Medicare Part A and Part B covers expenses such as hospital stays, doctor visits and services, physical therapy, lab tests and more, and in Medicare Part D, which covers prescription drugs.