New Retirees' Estimated Health Costs Up 7.5 Percent from 2006
Fidelity Investments released its latest health
care cost estimate March 27: A 65-year-old couple retiring in 2007 will need
approximately $215,000 to cover medical costs in retirement, and this is up by
7.5 percent from the 2006 estimate of $200,000.
Fidelity, which manages numerous companies' 401(k) plans,
is ending its own defined benefit pension plans and switching entirely to
defined contribution 401(k)s, the Boston Globe reported
yesterday. Fidelity is based in Framingham,
The company made its first health care cost estimate in
2002. Since then, the number has risen by 34 percent, with an average annual
increase of 6.1 percent.
The 2007 estimate assumes individuals do not have
employer-sponsored retiree health care coverage and includes expenses
associated with Medicare Part B and D premiums, Fidelity said. The estimate
also means that a 65-year-old worker today who is earning $60,000 and retires
at the end of this year should expect that 50 percent of his or her pre-tax
Social Security benefit will be spent on personal health care expenses in the
next 16 to 18 years.
"A significant amount of retirees told us their state
of health is not good, they are spending more in retirement than they ever
planned, and some were even forced into an early retirement due to health
problems," said Brad Kimler, senior vice president of Fidelity Employer
Services Company. "But if today's workers act now to take greater
advantage of the many retirement savings vehicles available to them, they can
create a more secure and enjoyable retirement."