Think you have enough money to support you in good style in retirement? Health care costs are the Achilles Heel of many retirement plans.
A 65-year-old couple retiring in 2009 will need approximately $240,0001 to cover medical expenses in retirement2 even with Medicare insurance coverage, according to Fidelity Investments’ latest health care cost estimate. This figure is a 6.7 percent increase over the 2008 estimate of $225,000.
That is a $15,000 increase of total costs in just one year. Imagine someone at age 64 deciding "Hey, I've gotta save an additional $15k before I can retire next year". Suppose this $15k increase happens year after year. Someone retiring 10 years from now will need another $150k.
Getting sick is expensive, even if a government is footing most of the bill. Avoid sickness. You can't afford it.
Fidelity Investments has calculated an annual retiree health care cost estimate since 2002. For many Americans, health care is likely to be their largest expense in retirement. Over the past seven years, the amount needed for retiree health care costs has jumped $80,000 or 50 percent from $160,000 in 2002.
I'm forecasting de facto rationing of health care just like in Britain, Canada, and other countries with socialized medicine. How will the US government implement waiting queues?
Plan on working to age 75. If you are young enough plan on never retiring since rejuvenation therapies will make retirement obsolete and unaffordable. But before we reach that point I'm expecting much higher costs and rationing.
“American households, already under strain from the difficult economy, are facing another challenge to their financial security in retirement as medical costs continue to rise steadily,” said Brad Kimler, executive vice president of Fidelity’s Consulting Services business, which calculated the retiree health care cost estimate. “With employee-sponsored retiree health care coverage on the decline nationwide, it is imperative that today’s workers begin to set aside money themselves for medical expenses in retirement as part of their overall retirement strategy.”
As in years past, the Fidelity 2009 retiree health care cost estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program Medicare. The Fidelity estimate takes into account cost sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Medicare.
The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care.
The jump in the retiree health care cost estimate from 2008 to 2009 can be attributed to a number of factors including higher costs (e.g. for doctor’s visits, diagnostic tests); increased expenses associated with new technology; and general price inflation.
What I want to know: What real tangible benefits are we getting in exchange for the higher costs?
|Share |||By Randall Parker at 2009 March 29 03:47 PM Economics Health|