Fidelity Estimates $200,000 Needed for Health Care in Retirement

March 6, 2006 ( - The average 65-year-old couple needs an estimated $200,000 to cover health care costs in retirement, Fidelity Investments announced Monday.

Brad Kimler, Senior Vice President at Fidelity Employer Services Company, said this estimate includes costs for Medicare Part B and D premiums, items Medicare Part A does not cover, and the cost of supplemental insurance. The estimate does not include costs for long-term care.

The $200,000 is a 5.3% increase from Fidelity’s estimate of $190,000 last year (See Fidelity: Estimated Retirement Health Costs Jump 8.6%). Kimler said inflation and the rising costs of Medicare are the reasons the number increases year over year.

Kimler pointed out that most people do not plan for health care separately or include it at all when planning for retirement. “For a lot of people health care is the largest liability they will take into retirement and it is the most overlooked,” he said in a conference call with reporters.

Some things employees can do to prepare for their retirement health care needs, according to Kimler, are to maximize contributions to 401(k) plans and individual retirement accounts (IRAs) and make healthy lifestyle choices. People with unhealthy behaviors will need more, he pointed out.

Kimler said that Fidelity also emphasizes the advantages of health savings accounts (HSAs) in helping people meet their health care needs in retirement.

Employers are trying to help employees plan for health costs in retirement by using features such as automatic enrollment and automatic deferral increases in 401(k) plans, emphasizing the role HSAs play in long-term health care savings, and utilizing wellness programs to encourage healthy behaviors, Kimler said.