Cost of Medical Expenses Likely to Soar in Retirement

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Perhaps you daydream about using hard-earned retirement money to travel and see the world. But if you are unprepared, the reality can be more like a nightmare — especially in terms of health care costs.

To cover your own out-of-pocket health care costs during your golden years, you and a spouse will need about $260,000, according to new estimates from Fidelity Investments.

Yikes.

Fidelity says a couple, both 65 years old, retiring this year will need about $260,000 on average to pay for lifetime medical expenses, which traditionally include Medicare premiums, Medicare co-payments and deductibles, and out-of-pocket prescription costs.

That $260,000 estimate — $125,000 for the retired man and $135,000 for the retired woman (based on average life expectancies of 87 for women and 85 for men) — is a 6 percent hike from Fidelity’s estimate for 2015 and an 18 percent bump from 2014, according to a Bloomberg report.

Obviously, many retirees live beyond Fidelity’s age estimates. If that’s the case for you, your health care tab will likely continue to increase.

It’s also important to note that the $260,000 figure does not include the cost of insuring against long-term care expenses. Fidelity estimates such expenses will cost you an extra $130,000 in retirement, beyond the $260,000 you need to have saved for health care costs. According to Fidelity:

This assumes the couple is in good health and purchases a policy with $8,000 monthly maximum benefit, with three years of benefits, and an inflation adjuster of 3 percent per year.

Medicare doesn’t cover most long-term care stays in a nursing home or assisted living, nor does it pay for other medical services like routine dental work, eyeglasses, vision exams, hearing exams or hearing aids. With that in mind, Fidelity recommends retirees look into purchasing a supplemental health policy to cover some of the medical costs associated with their retirement years.

Are Fidelity’s estimates higher or lower than you expected? Sound off below or on our Facebook page.

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