This is excerpted from a 2009 WSJournal article. BTW, pls remember that the current Healthcare Reform bill has the CLASS act for a modest LTC care benefit (buy-in period is at least 5 years and employer participation is voluntary) and the 'donut hole' in Part D will be slowly phased out by 2020. Of course, if the Republicans are successful in negating the reform bill, as they are threatening to do, those two provisions may disappear from lack of funding:
WSJournal March 27, 2009
"A 65-year-old couple who retires this year will need about $240,000 to cover their medical expenses in retirement, according to Fidelity Investments research released this week.
This year’s number is 6.7% higher than last year’s $225,000–and 50% higher than the $160,000 estimate in 2002, the first year Fidelity came up with a number. “These costs are going up at a faster rate than income,” says Sunit Patel, a senior vice president of Fidelity’s Consulting Services group. Higher costs for doctor visits, diagnostic tests and prescription drugs contributed to the increase, he adds.
Keep in mind that this eye-popping number is a lifetime estimate and assumes that the couple has no employer-provided retiree-health-care coverage, since many companies are phasing out that benefit. It also assumes life expectancies of 17 years for the husband and 20 years for the wife after retirement.
What’s even more sobering than the big chunk of money involved is what it covers-–and what it doesn’t. Mr. Patel says that 29% of those savings are needed by the average couple to pay premiums for Medicare Part B, which covers doctor visits and other outpatient costs, and the Medicare Part D prescription-drug plan. Another 41% goes toward Medicare copayments, deductibles and other cost-sharing provisions. The remaining 30% goes toward prescription-drug costs not covered by Medicare Part D.
But this estimate does not include over-the-counter medications, most dental services or long-term care–and those costs could quickly throw any budget out of whack. In 2008, the average annual rate for a private nursing-home room was $76,460–up 17% since 2004, according to Genworth Financial Inc., one of the country’s largest long-term-care insurers. In a separate study last year, Fidelity estimated that the average 65-year-old couple needs $85,000 to buy adequate long-term-care insurance."
Actually, Fidelity's figures are low compared to the ones from the Center for Retirement Research at Boston College, which was quoted in an April 2008 column by financial columnist Liz Weston:
Note: The Center’s website has a full list of its white papers on Healthcare at: http://crr.bc.edu/topics/health.html, and this specific analysis can be found at: http://crr.bc.edu/briefs/health_care_costs_drive_up_the_national_retirement_risk_index.html."
Jkom, you continue to scare me more and more. IMO one needs to get a comprehensive MediPak or supplemental insurance to pick up most things that Medicare does not. I have a relative that couldn't afford one and the co-pays/co-insurance on lessor plans are pretty much bankrupting him. Also, the drug program is getting a bit cheaper as they address the donut hole costs.
Well, knowledge is power, as they say. It's why I don't tend to agree with those who say you don't need a professional (fiduciary) advisor if you can use a spreadsheet and DIY. A person's financial well-being depends on many factors, and investment ROI is only a very small portion of that holistic strategy.
DH and I tend to be very aware of supplemental medical costs because although we have very good retirement insurance, dental and vision are no longer covered, and for the last 6 years we have spent thousands of $$ on a regular basis for alternative medical practices that come out of our own pocket.
Many people are amazed at how well DH recovered from a severe haemorrhagic stroke at age 50. But we spent almost $8,000 of our own money in the first 12 months, getting him regular acupressure treatments. Our acupressurist even came to the hospital in those first days to treat him. He saw her 3x/week for regular treatment. It was so much more effective in his recovery than the standard physical therapy he received, which was minimal anyway - we belong to an HMO, and they wouldn't even find him a cane when they shoved him out the hospital door after 4 days.
When we were doing our retirement budget, alternative/supplemental healthcare costs were always included as a substantial line item. But I think many people tend to grossly underestimate how much healthcare costs are going to impact one's budget, especially with inflation a factor.
Retrieving data ...