It's not news that health care costs are increasing. Yet several recent studies show that few people factor those rising costs into their retirement plans. According to Fidelity Investments, a 65-year-old couple retiring this year, the cost of health care in retirement will be $240,000, 6 percent more than that same couple retiring in 2011 would pay. The report assumes that the man will live 17 years and the woman 20.
"Most people don't realize Medicare covers much less than traditional employer plans," Sunit Patel, senior vice president in Fidelity's benefits consulting group. Another study found that people who were near retirement routinely and wildly overestimated the percentage of health care costs covered by Medicare. It covers only 51 percent of health care services.
A calculator developed by Putnam, called the Lifetime Income Analysis Tool (putnam.com/401k/tool/), shows people not only how much they have saved, but also, starting next year, how much they need to save depending on their health (cigarette smokers with diabetes need to save the least because their life expectancy is the shortest) and where they plan to retire (Louisiana is the cheapest, Alaska the most expensive) so they can live at their same income in retirement.