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Retired couples need $250,000 for health care costs

By Chavon Sutton, staff reporter


NEW YORK (CNNMoney.com) -- If you're retiring this year, you will need $250,000 in savings to cover your family's medical expenses during your retirement, Fidelity Investments announced on Thursday.

That's up just more than 4% over last year and a 56% spike compared to 2002, when Fidelity first issued its Retiree Health Care Costs Estimate.

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Each year Fidelity forecasts what a U.S. couple retiring at age 65 would need to cover their health care expenses during retirement, presuming they qualify for Medicare and do not have an employer-sponsored plan.

The spike in what couples must save can be attributed to higher costs associated with treatment costs, new technologies and general price inflation, said Fidelity, which assists companies in planning their employee benefit programs.

But some experts say the estimate can be misleading because a multitude of factors, including life expectancy, could push costs higher or lower than averages.

"It's important to recognize that most people aren't average," said Paul Fronstin, director of health research for The Employee Benefit Research Institute, an independent public policy organization.

And based on Fidelity's findings, retired couples would spend $10,000 a year over an average 25 to 30 years of retirement, which is on par with what they pay now, says Bill Losey CFP, a New York-based financial planner.

Still medical costs are expected to become a larger chunk of retirement expenses and many retirees are still unprepared.

The Fidelity study found that only 3 out of 10 retirees saved specifically to cover health care costs while they were working. And 47% said that monthly out-of-pocket costs and insurance premiums were higher than they had anticipated.

Fidelity reported that average health care costs were $535 a month, or one-fifth of a couple's total monthly expenses of $2,842.

Though Losey says the figure may unnecessarily scare people, he added that a little fear might not be such a bad thing if it improves awareness and planning, especially in the face of health care reform.

"This statistic is going to scare people," says Losey, "but maybe in a good way that forces people to get off their behinds and eat better, exercise more, and hopefully keep their health insurance costs in check." To top of page

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