Mar. 6--Retirement is getting more expensive, according to a report released Wednesday that shows the average 65-year-old couple retiring this year will need about $225,000 just to cover their medical expenses once they stop working.
Boston-based Fidelity Investments' latest health care cost estimate marks a 4.7 percent increase from 2007, when it was estimated that retiring couples would need about $215,000 to cover their medical costs in retirement.
The 2008 estimate assumes individuals do not have employer-sponsored retiree health care coverage and includes expenses associated with Medicare Part B and D premiums, Medicare cost-sharing provisions, and prescription drug out-ofpocket costs.
It does not include other health-related expenses, such as over-the-counter medications, most dental services and longterm care.
"I would actually think that $225,000 would not be enough to be comfortable," said Ellen Andrews, executive director of the Connecticut Health Policy Project in New Haven, a nonprofit that advocates access to affordable health care. "Costs are going way up."
A major factor driving up overall health care costs nationwide is the growing expense of Medicare, she said. At the same time retirees find themselves on a fixed income, she said, "more and more employers now are dropping coverage for retirees" because of rising Medicare costs. "We expect to see more of that."
Health care costs are rising at a faster rate than most other consumer expenses, with the exception of energy and food, Andrews said.
According to Fidelity, the increase in this year's cost estimate compared with 2007's is due in part to the higher cost of medical visits as well a growing number of people using health care services.
Other contributing factors include rising costs associated with new technologies such as improved diagnostic testing, prescription drugs and an increase in certain chronic conditions such as diabetes, the report showed.
"With health care costs continuing to outpace wage increases and companies trimming retiree health benefits, financing health care has to be central to retirement planning," Brad Kimler, Fidelity's executive vice president, said in a written statement.
"Given current economic conditions, this is especially true for those planning to retire in the next few years or before they qualify for full Social Security or Medicare benefits," he said.
To ease the cost burden of medical costs in retirement, Fidelity urges consumers to create an individual retirement plan as early as possible and maximize their opportunities to save.
Consumers also should become better informed about their own health status and the various health care options available to them, as well as be clear about the details of any employer-sponsored coverage.
Finally, Fidelity advises consumers to understand the financial impact of health care costs on Social Security income.
A 65-year-old worker who is earning $60,000 and decides to retire this year should expect that 50 percent of his or her pre-tax Social Security benefit will go toward health care expenses in the next 17 to 19 years, according to Fidelity.
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