Health Care Costs for Couples in Retirement Rise to an Estimated $245,000

BOSTON–(BUSINESS WIRE)–While many things get better with age, new research shows the cost of
health care isn’t one of them. Fidelity’s Retirement Health Care Cost
Estimate reveals that a couple, both aged 65 and retiring this year, can
now expect to spend an estimated $245,000 on health care throughout
retirement, up from $220,000 last year1.

The figure has increased 29 percent since 2005 when it was $190,000 (see
chart
). Factors boosting this year’s estimate include longer life
expectancies and anticipated annual increases for medical and
prescription expenses2. The estimate assumes enrollment in
Medicare health coverage but does not include the added expenses of
nursing home or long-term care.

“The sticker shock of $245,000 hopefully reinforces for many people that
they need to act now, regardless of their age,” said Brad Kimler,
executive vice president of Fidelity’s Benefits
Consulting Services
. “For people offered a high-deductible health
plan with a health savings account at work, choosing this option can
really help them prepare, especially for Millennials who have a long
time to save.”

Strategic Choices Can Help Mitigate Costs

As pre-retirees evaluate health insurance options for retirement, they
may wish to consider private Medicare Advantage programs available in
their area. Under typical Medicare Advantage plans, people pay monthly
premiums to a private insurer and in many cases have a higher percentage
of claims and prescriptions covered versus traditional Medicare. Over an
extended time period like a couple’s retirement, this option could
reduce their overall costs.

For people enrolled in high-deductible health plans paired with health
savings accounts
(HSAs), Fidelity recommends they open an HSA to
save for qualified health care expenses today and in retirement. HSAs
are a convenient way to pay for current and future medical expenses
through a tax-advantaged account3. Contributions that are not
spent each year may carry-over and be invested to help pay for health
care in retirement (see Three
Healthy Habits for HSAs
).

Transitioning into Retirement? Don’t Go It Alone

In Fidelity’s 2015
Couples Retirement Study
, nearly three-fourths of couples surveyed
said being able to afford unexpected health care costs in retirement was
their top concern. However, only 22 percent of couples had factored it
into their financial planning4.

“People transitioning into retirement should seek help from trusted
resources such as their retirement provider, employer or financial
advisor,” said Kimler. “Important decisions on when to retire, how to
manage debt or choosing health insurance will have a lasting impact.”

“Clients routinely tell us they’re worried about retirement medical
expenses, so we make sure to add health care into all our planning
conversations,” said Michael Gouldin, CEO and President, Gouldin &
McCarthy, LLC, an independent advisory firm in Basking Ridge, N.J.

In addition to helping investors prepare for the escalating costs of
health care in retirement, Fidelity offers education on a broad range of
retirement savings issues, including: asset allocation in 401(k)s,
403(b)s and IRAs, developing
a retirement income plan
, and how to rollover a 401(k). Help is
provided by phone representatives, at workplace education seminars,
online and over mobile devices, and in-person at Fidelity’s 180
investor centers nationwide
. The firm also posts informative content
on 401k.com,
on Twitter and Facebook, and through Viewpoints (Retiree
Health Costs Rise
) on Fidelity.com.

About Fidelity Investments

Fidelity’s goal is to make financial expertise broadly accessible and
effective in helping people live the lives they want. With assets under
administration of $5.1 trillion, including managed assets of $2.0
trillion as of August 31, 2015, we focus on meeting the unique needs of
a diverse set of customers: helping more than 24 million people invest
their own life savings, nearly 20,000 businesses manage employee benefit
programs, as well as providing nearly 10,000 advisory firms with
technology solutions to invest their own clients’ money. Privately held
for nearly 70 years, Fidelity employs 42,000 associates who are focused
on the long-term success of our customers. For more information about
Fidelity Investments, visit https://www.fidelity.com/about.

Keep in mind that investing involves risk. The value of your investment
will fluctuate over time and you may gain or lose money.

Fidelity Brokerage Services LLC, Member NYSE, SIPC
900
Salem Street, Smithfield, RI 02917

Fidelity Investments Institutional Services Company, Inc.,
500
Salem Street, Smithfield, RI 02917

National Financial Services LLC, Member NYSE, SIPC,
200
Seaport Boulevard, Boston, MA 02110

737109.1.0
© 2015 FMR LLC. All rights reserved.

1 2015 Fidelity analysis performed by its Benefits Consulting
group. Estimate based on a hypothetical couple retiring in 2015,
65-years-old, with average life expectancies of 85 for a male and 87 for
a female. Estimates are calculated for “average” retirees, but may be
more or less depending on actual health status, area of residence, and
longevity. The Fidelity Retiree Health Care Costs Estimate assumes
individuals do not have employer-provided retiree health care coverage,
but do qualify for the federal government’s insurance program, Original
Medicare. The calculation takes into account cost-sharing provisions
(such as deductibles and coinsurance) associated with Medicare Part A
and Part B (inpatient and outpatient medical insurance). It also
considers Medicare Part D (prescription drug coverage) premiums and
out-of-pocket costs, as well as certain services excluded by Original
Medicare. The estimate does not include other health-related expenses,
such as over-the-counter medications, most dental services and long-term
care. Life expectancies based on research and analysis by Fidelity
Investments Benefits Consulting group and data from the Society of
Actuaries, 2014.

2 For purposes of this hypothetical analysis, a 4% to 5%
annual rise in health care costs is assumed.

3 Contributions, investment earnings, and distributions are
tax free for federal tax purposes if used to pay for qualified medical
expenses, and may or may not be subject to state taxation. For
additional information, see IRS Publication 969. The administration of
an HSA is an individual responsibility; see a tax professional for more
information.

4 Fidelity Investments 2015 Couples Survey, June, 2015. The
2015 Fidelity Investments “Couples Retirement Study” analyzed retirement
and financial expectations and preparedness
among 1,051 couples (2,102 individuals). Respondents were required to be
at least 25 years old, married or in a long-term committed relationship
and living with their respective partner, and have a minimum household
income of $75,000 or at least $100,000 in investable assets. This
online, bi-annual study was launched in 2007, and is unique in that it
tests agreement of both partners in a committed relationship on
communication, as well as their knowledge of finances and retirement
planning issues. Fidelity Investments was not identified as the sponsor.
GfK’s Public Affairs & Corporate Communications division executed the
study, which was fielded in April 2015.

Contacts

Fidelity Investments
Corporate Communications, 617-563-5800
fidelitycorporateaffairs@fmr.com
or
Chuck
Kabat, 617-563-3365
charles.kabat@fmr.com