A 65-year-old couple retiring this year will need an estimated $260,000 to cover health care costs in retirement, a 6% increase over the 2015 calculation, according to Fidelity's Retiree Health Care Cost Estimate, released Tuesday.
The new estimate was the highest since Fidelity started making calculations in 2002.
Fidelity said in a statement that it based its estimate on a hypothetical 65-year-old heterosexual couple retiring in 2016, with life expectancies of 87 for the woman and 85 for the man, though costs could be more or less depending on actual health status, area of residence and longevity. The estimate was net of taxes.
Fidelity's calculation assumed individuals had no employer-provided retiree health care coverage but did qualify for Original Medicare. It took into account cost-sharing provisions associated with Medicare parts A and B, and also considered Medicare Part D premiums and out-of-pocket costs, as well as certain services excluded by Original Medicare.
Not included in the estimate were other health-related expenses, such as over-the-counter medications, most dental services and long-term care.
Fidelity said several factors accounted for the 6% increase in its 2016 estimate, including increased use of medical services and escalating drug costs.
"In recent years, the health care industry has experienced a period of historically low spending levels, due to a range of factors including a period of slow economic growth," Adam Stavisky, senior vice president at Fidelity Benefits Consulting, said in a statement.
"Looking forward, we expect health care spending to pick up from where it's been in recent years, though less than what we've seen over the last few decades," Stavisky said, citing research by the Kaiser Family Foundation.
Long-Term Care Costs
In compiling its new report, Fidelity also examined costs associated with long-term care.
Noting that Medicare covers long-term care costs only in limited circumstances, Fidelity estimated that a 65-year-old couple would need $130,000, in addition to savings for retiree medical expenses, to insure against long-term care costs.
