<p>Please consider health-care costs and the likelihood of having insurance. This is something that I just found on the Internet:</p>
<p>Fidelity Investments®, a leading provider of employer benefits, today announced the results of its annual Retiree Health Care Costs Estimate that found a 65-year-old couple retiring this year will need a quarter of a million dollars ($250,000) to pay for medical expenses throughout retirement, not including nursing-home care.</p>
<p>When computing this figure, Fidelity assumed that the couple would not have employer-provided health-care benefits during retirement but would be covered by Medicare. The $250,000 thus includes co-pays, deductibles, uncovered expenses, prescription drugs, etc.</p>
<p>Based on my experience with older relatives, $250,000 seems to be way too low even for one person, let alone couple. One more reason to work until being kicked out and die shortly after that.</p>
<p>This calculation is laughable. what happen to those who do not have $250K? I will bet there are quite some number of people who have never had $250K in their names, before or after retirement.</p>
<p>If you only have $500 in your checking account and you need $1,000 to pay for a prescription drug to keep you alive. What happens then? Does the hospital just throw your $ss out of the bed and let you die?</p>
<p>I would also bet that Fidelity or any other “Investments” firms are doing these to scare people. They want you to give them your hard earn $$ so they could generate fees to pay for their million dollar bonus. Remember, they live off your “investments”. If the market goes down, your account goes down. Their fees remain the same.</p>
<p>Dad II, it sounds to me as though you’re shooting the messenger (Fidelity). Sure, it wants to make money, but I think these are legitimate estimates. It appears to be widely acknowledged that Americans undersave for retirement and that they underestimate their costs for retirement.</p>
<p>I don’t think Fidelity is a messenger here. Do you think they are doing this as a public service or they have their own intere$t$? </p>
<p>What is your base to say “these are legitimate estimates.”? As so many retired/retiring people do not have $250K in their names. What happen to them? I don’t see govt ship them over to help putting water into them blown up reactors.</p>
<p>According to the June 2009 EBRI Notes, a 65-year-old man retiring in 2009 who has employment-based retiree health benefits to supplement Medicare but whose former employer does not subsidize premiums—an increasingly common situation—would need $111,000 in savings if he wanted a 50 percent chance of having enough money to cover health care expenses in retirement.
In 2019, a 65-year-old man who paid the entire premium for health benefits through a former employer would need $186,000 in savings if he wanted a 50 percent chance of having enough money to cover retirement health care expenses. The chart also shows the amounts needed for a 75 percent and 90 percent
chance of having enough savings to cover retiree health care costs under the situations described above. Women would need more because they are likely to live longer</p>
<p>The 2010 EBRI Retirement Readiness Rating™ from the nonpartisan Employee Benefit Research
Institute (EBRI) finds that well over a third (41 percent) of Americans in the lowest preretirement
income level will be running short after 10 years in retirement.</p>
<p>An individual or family is considered to “run short of money” if their aggregate resources in retirement
are not sufficient to meet aggregate minimum retirement expenditures—defined as a combination of
basic expenses from the Bureau of Labor Statistics’ Consumer Expenditure Survey and some health
insurance and out‐of‐pocket health-related expenses, plus expenses from nursing home and home health
care expenses, at least until the point they are picked up by Medicaid.</p>
<p>While many people on Medicare initially or eventually don’t have employer provided access to health insurance, there are Medi gap policies that provide additional coverage. I believe that in addition to this, Medicare Part D (as in drug coverage) is now required for those on Medicare (or pay a penalty). You choose a provider and pay for this. While not inexpensive, Medi-gap policies can be a lot cheaper than paying OOP. This is especially true if you start needing Skilled Nursing Facility care post hospitalization for more than the @ 3 weeks presently covered by Medicare. This is something to keep an eye on as baby boomers.</p>
<p>DadII. You seem to be misunderstanding that figure. Assuming, for example, that the average person lives 25 yrs past the age of 65, the figure put out by Fidelity says that that person will spend about $416/month on healthcare expenses (medicare premiums, deductibles, copays, meds, etc.) Even if they are on a fixed income, they will most likely have $416/mo.</p>
<p>By then maybe some can take the $ out of that pillowcase under their bed that they possibly used to shelter it from FAFSA and CSS, and the’ll have the $$ from grandma and grampa’s account where they may have stashed the rest.</p>
<p>^ That’s $416/month <em>each</em>, $832 for the couple.</p>
<p>The average SS benefit for a retired worker and spouse is about $1750/month, meaning health care will eat up 30% of the average retired couple’s SS income. Hopefully they have other income, but many won’t.</p>
<p>Yes that is correct, $416 each. Hopefully most people that are dependent on their SS income for retirement were both in the work force and both have SS retirement income. </p>
<p>Are you saying that a COUPLE who were BOTH wage earners only collect $1750/mo in SSI? Do you have a reference for that? If people are below the poverty level then they can apply for Medicaid as well as medicare to defray healthcare costs.</p>
<p>Garland,
I was thinking about your figure of living on $30,000/y. I couldn’t do it. My insurance policies are over $23,000/y. Add to that real estate tax, doctor visits, prescriptions, gas, food, home maintenance, etc.</p>
<p>My in-laws live on less than $30,000 a year but only because their house is paid off, they’re frugal, and, most important, my FIL has employer-provided health benefits.</p>
Yes, and the average for the spouse is 581.20.</p>
<p>If both people worked and made the same amount of money, yes, each would get $1178. A spouse is entitled to their own SS, or half of the other spouse IIRC. I know many more families where one spouse makes significantly more than the other, or one doesn’t work, than where both spouses make about the same. I don’t have statistics for the country as a whole.</p>
<p>I screwed up my math earlier, 832/1750 is 47% of their income for health care.</p>
<p>Even if both are getting their own, 832/(1180*2) = 35% of their income. And you think this is affordable?</p>
<p>Even if both people get the max (around $2400/month) it’s still 17% of income. Hopefully if you are getting the max you have saved for retirement, but it is still a big chunk.</p>
<p>I don’t think Fidelity’s intent is to scare people. Like any brokerage, Fidelity earns money on transaction and management fees. But in meeting with Fidelity advisers over the past 20 years, I’ve observed that their push is more for asset allocation rather than any one particular fund. They offer access to thousands of funds outside of the Fidelity family.</p>
<p>I’ve used the Fidelity online calculator several times over the past couple of years. Like many calculators that use the past to predict the future, their calculator includes Monte Carlo simulations. T Rowe Price has a similar calculator. If you don’t trust a brokerage to calculate your retirement needs correctly, here’s another Monte Carlo simulator: [Online</a> Monte Carlo Retirement Planner](<a href=“http://www.flexibleretirementplanner.com/]Online”>http://www.flexibleretirementplanner.com/) The “Further Reading” page contains some interesting links.</p>
<p>All that is true, notrichenough. And again, if they have no other source of income, they would qualify for Medicaid as well, and with the two combined (Medicare/Medicaid) they would be paying little if anything out of pocket. They would NOT be paying a third of their income in healthcare. More like next to none of their income would be spent on healthcare. </p>
<p>We are blending the stats from the SSA website with some numbers thrown out by Fidelity. In the article I linked from Fidelity surveyed people with a net worth of over $3M. Thats a bit of a different population than the medicaid-eligible retirees. Megdog, where did your Fidelity reference come from??</p>
<p>Even with a decent corporate-grade health plan, we still spend well over $5000/year on medical expenses (that’s the FSA limit, so I know we spend at least that much), and between us we take zero prescription drugs, and that’s not counting the $4000 or so we are paying for our share of the insurance.</p>
<p>So there is at least $800/month, and we are not even old or retired yet, when presumably we will be less healthy.</p>
<p>I don’t really know what medicare/medicaid will provide or what they cost, but are they really going to be better than what my company provides? Are my health costs going to go down when I am retired? Hard to believe…</p>
<p>I can easily see medical expenses chewing up 1/3 of our after-tax income when we are retired.</p>
<p>I remember reading an article that said that we need to rename “retirement planning” with the phrase “longevity planning”, which makes us concentrate more on the fact that we could live into our 90s and less on the fun that we plan to have after we quit working.</p>