Wednesday, March 5, 2008

Eye Opening Fidelity Study: You Need a LOT More Than You Thought To Retire

This sobering report is something you should keep nearby to show your clients who THINK they have enough... td

Retiree couple needs $225K for medical


AP Business WriterWed Mar 5, 10:11 AM ET

A couple retiring this year will need about $225,000 in savings to cover medical costs in retirement, according to a study released Wednesday by Fidelity Investments.

The figure, calculated for a couple age 65, is up 4.7 percent from the $215,000 estimate for 2007, the Boston-based financial services company said.

And it is similar to other projections for health care costs in retirement — daunting figures given that longer life spans also are requiring workers to increase retirement nest eggs.

A separate study released last month by the Center for Retirement Research at Boston College estimated that an individual needs to go into retirement with some $102,000 earmarked just for health care coverage, while a couple needs about $206,000.

Given current levels of retirement savings, the center said, six in 10 older workers are "at risk" of being unable to maintain their standard of living in retirement.

The Fidelity study, which has been conducted annually since 2002, assumes workers do not have employer-sponsored retiree health care coverage. It includes expenses associated with Medicare premium payments as well as co-payments and deductibles, plus out-of-pocket prescription drug costs.

"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, executive vice president of Fidelity's benefits consulting group, said in a statement accompanying the report.

Fidelity's first study in 2002 found that a couple needed $160,000 in savings to fund medical costs in retirement, and that total has risen an average of 5.8 percent a year.

The study blamed the rising health care costs this year on higher unit costs, for example the cost of a doctor's visit; higher utilization rates for health care services; rising costs associated with new technologies; and increased incidence of some chronic conditions, like diabetes.


1 comment:

I'm Not Larry said...


I'd like to see the details of that study... Are they saying the $160K will cover the medical expenses or that $160K needs to be invested at some reasonable interest rate so that the income from $160K covers medical expenses???

Under what conditions is this needed? No health and/or LTC insurance?? Are they figuring that the individual will be footing all of the bills or just co-pay, premiums, etc???

In my experience, these studies are often the first step... The second step is then to offer some sort of product to "fix" the problem conveniently illustrated in step one...

"These are serious times. We have serious issues, and we need serious people to address them"...

Anyone want to hazard a guess as to where that quote came from (no Googlecheating)??