Senior Couples Not Financially Prepared For Future Medical Costs

The increase is smaller compared to last year.  The Fidelity 2010 retiree health care costs estimate ($250,000) is 4.2 percent higher than last year’s estimate of $240,000 and 56 percent higher than in 2002, when the company first calculated retiree health care costs at $160,000. 

The study assumes no employer-provided retiree health care coverage and life expectancies of 17 years for men and 20 years for women. 

The annual health care costs estimate revealed that almost half (47%) are paying more each month for insurance premiums and out-of-pocket health care costs than they had anticipated in retirement. Only three out of 10 of these retirees saved specifically for health care needs in retirement during their working years. 

Among those surveyed, 11 percent said their health care costs are $1,000 a month or higher. Average health care costs ranked second to the largest expense, food, which averaged $659 a month and slightly higher than housing-related costs, which averaged $494.

“Too few people have even planned for long-term care one of the most costly expenses,” explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance.  “Planning needs to begin in your 50s because few are able to health qualify for protection once they reach retirement age.” 

When asked to identify their single biggest financial concern today, three out of 10 retirees said paying for today’s health care costs and long-term health care expenses such as a nursing home are among their biggest worries. 

Other financial concerns included paying for daily living expenses such as food, transportation and utilities (17%), assisting grown children and grandchildren with their financial needs (10%) and paying for housing (7%). A little more than a third (35%) of retirees said they have no financial worries.

According to the study, over half (51%) are paying out-of-pocket for health care costs not covered by Medicare and four out of 10 (45%) have bought supplemental insurance to cover the gap. Only a small percentage of retirees indicated using other measures, such as tapping retirement funds earlier than anticipated (2%), credit cards (2%) or relying on family (1%). 

However, more than four in 10 of those surveyed (44%) said health care expenses have had a negative effect on their retirement budget.

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