Healthcare could cost couples $280K in retirement
Fidelity Investments’ annual cost estimate is new motivation for employers to step up efforts in helping employees plan for medical expenses during their post-work years.
Employers better step up their employee retirement planning efforts: According to Fidelity Investments’ latest annual cost estimate, a 65-year-old couple retiring this year would need $280,000 to cover healthcare and medical expenses throughout their retirement. That’s a 2% increase from 2017, and a whopping 75% increase from Fidelity’s first estimate in 2002. “Despite this year’s estimate remaining relatively flat, covering healthcare costs remains one of the most significant, yet unpredictable, aspects of retirement planning,” says Shams Talib, executive vice president and head of Fidelity Benefits Consulting. “It’s important for individuals to educate themselves and take steps while working to ensure they are prepared to address these costs. Otherwise, people risk having to dip into more of their savings than originally anticipated, potentially impacting their overall retirement lifestyle.” Fidelity’s healthcare cost estimate is based on metrics that shift depending on the economy and changes in government regulations. The 2% increase to this year’s estimate was the smallest annual increase since 2014, “which indicates that many of the factors contributing to the estimate, such as prescription out-of-pocket drug expenses and Medicare premiums, have remained relatively flat over the last year,” Fidelity found. The Fidelity report has implications for employers, who increasingly have been discussing with employees how to manage healthcare costs in retirement. More employers have been pushing health savings accounts; the money saved in an HSA can be used for medical expenses in retirement if a person doesn’t use up their balance every year. Any extra funds are invested, just like they would be in a typical retirement plan. “Individuals who are faced with the prospect of retiring early, regardless of the reason, will need to educate themselves on the options available to bridge the gap to Medicare eligibility to help pay for the extra healthcare expenses they’re likely to incur during this period,” Talib says.