Thomas Lockwich of Holiday retired late last year at age 65 with about $200,000 socked away for future medical expenses.
But Lockwich, who has coverage for major medical costs through Medicare and a private supplement, hopes he won't have to spend all his savings on health bills. "Hopefully I'll be able to use some of it for traveling,'' he said.
That's not likely, according to a study released Wednesday by Fidelity Investments.
A 65-year-old couple retiring this year will need about $225,000 in savings to cover medical costs in retirement, the Boston-based financial services firm said. The estimate is up 4.7 percent from Fidelity's $215,000 figure for 2007. 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.
Brad Bryan of Trinity is 60 and semiretired. As the owner of a bar and grocery store, he gets medical coverage for himself and his wife through a small group insurance plan. Looking ahead to full retirement, Bryan said Fidelity's estimate of out-of-pocket medical costs is not surprising.
"All you need is a few hospital stays and the costs go up quickly,'' he said. "But people aren't going to have that amount of savings. More and more people will be making decisions about whether they'll eat or take their meds."
The Fidelity study, 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 costs. The data are based on national averages and may vary by region based on cost of living.
Ray Ferrara, a certified financial planner in Clearwater, said he thinks Fidelity's estimate may be on the low side. And with recent studies showing the average 55-year-old has set aside less than $65,000 for retirement, Ferrara said there are important social and political implications.
"Those who don't have $225,000 are going to fall back on the government and society to take care of them,'' he said. "The solution is to cut benefits, raise Medicare deductibles or increase taxes. But those are not the kinds of things politicians want to tackle."
Information from wire stories was used in this report. Kris Hundley can be reached at [email protected] or (727) 892-2996.