2009 March 29 Sunday
Fidelity Sees Rapidly Rising Retiree Health Care Costs

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

Aki_Izayoi said at March 30, 2009 1:26 AM:

Well, people working at age 75 lowers everyone's income unless they are producing something extremely valuable since the people who should be retired are in the labor force.

I wonder if AI and possibly 3D integrated circuits would make everyone's work obsolete in the future. I would imagine that most people would simply not work in this case.

Malik said at March 30, 2009 8:33 PM:

Does the socialists feeling good about themselves and getting their revenge on the productive classes count?

Aki_Izayoi said at March 31, 2009 1:13 PM:

What do you mean? The socialists haven't been in power for quite a long time. Socialism has collapsed in the world during the 1990s, and it was replaced by neoliberalism. Hasn't the balance of power shift to capital from labor since the 1980s? Do you have any evidence that the socialist ideology trumped neoliberalism in the 2000s in the policy realm? If so, your rant against the "socialists" would have more merit.

Why one cannot blame this on the "capitalists" (owners of capital, need not be "productive") for driving down domestic wages and destroying community tax base through offshoring and immigration? In addition, this also causes significant stress by socializing the expenditures of the immigrants (and increasing demand for government programs since people are deprived of their livelyhoods by being displaced by cheap labor) by placing it in the public domain, some hospitals then pass this cost unto health insurance companies and consumers.

If socialism had its way of a unified global proleitariat, the world would be a better place. Think about it... the countries that embraced socialism would have their populations isolated from the global labor market. Most people in the US would have been better off it socialism had its way in the world. Not advocating socialism in the US though, just simply saying that world socialism did benefit the US.

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