Medical expenses are the wild card in all retirement plans. They are very difficult to estimate and control. Fidelity Investments has been putting out an annual estimate of retirement medical spending for several years. The good news in this year’s estimate is that the total retirement cost estimate is reduced, because medical spending increased at a slower rate the last few years, and that is incorporated in the numbers. The bad news is that for the average couple in retirement it still is a large chunk of money. The other bad news is that it is a lot more money than most people are expecting to spend.
The news isn’t all awful, but it’s not great either. Retirees still need to save up a big chunk of change to keep themselves in good shape as they age, and from the looks of it, so far we haven’t been thinking big enough. About half of 55 to 64-year-olds polled by Fidelity said they’d only need $50,000 to cover health care in retirement. This year and 2011 notwithstanding, health care cost estimates have risen 6% every year since 2002, according to Fidelity.
“While lower, this year’s estimate is still daunting for many retirees, and it will consume a considerable amount of a couple’s retirement savings,” said Brad Kimler, executive vice president of Fidelity’s Benefits Consulting business.