By Elizabeth O'Brien
April 2, 2019

The average couple retiring in 2019 at age 65 will need $285,000 to cover health care and medical costs in retirement, according to an annual estimate by Fidelity, released today.

For single retirees, the estimate is $150,000 for women and $135,000 for men, according to Fidelity. (These are estimates for today’s 65 year olds — barring major changes to the U.S. health care system, the numbers will be much higher by the time younger people reach that age.)

The good news is that health care costs have risen moderately in recent years — up just 3.6% over the past two years combined, compared with a 12.2% increase from 2015 to 2017. But the bad news is that retirement health care remains a budget-buster, underscoring the fact that Medicare coverage is neither free nor completely comprehensive.

Fidelity’s estimate assumes that both members of the couple are 65 and on Original Medicare, not a private Medicare Advantage plan. The $285,000 includes premiums for Part B doctor coverage and Part D drug coverage, out-of-pocket costs such as deductibles, as well cost-sharing requirements for drugs. It also includes certain services and devices that Medicare doesn’t cover, such as hearing aids.

Notably, the estimate does not include long-term care costs such as nursing home or assisted living expenses. It also excludes the cost of home health aides. Medicare doesn’t pay for the kind of long-term care costs that most older adults need — that is, so-called “custodial care” to help with activities of daily living such as bathing, eating and dressing, either at home or in a care facility. The national median cost of a bed in a semi-private nursing home is $89,297 a year, while assisted living costs $48,000 a year, around the same cost as 44 hours a week of a home health aide, according to Genworth’s 2018 Cost of Care Survey.

Fidelity assumes lifespans of 87 for a man and 89 for a woman.

 

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