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Posted: March 11, 2008

Got a Quarter Million Dollars Cash to Spend on Old-Age Medical Care?

A cool quarter of a million dollars that’s what experts say it will cost a couple retiring this year to cover their out-of-pocket medical expenses for the remainder of their lives.

Such a daunting number is not attainable for most Americans, who have seen the post-retirement medical expense prediction rise 4.7% to $225,000 from $215,000 in just the last year. Yet these costs are what the investment company Fidelity Investments says we’ll encounter as a result of longer life expectancies and development of treatments that extend life in more and more medical conditions.

Fidelity’s estimation follows and tracks with research projections announced last month by the Center for Retirement Research, at Boston College, that said each person entering retirement this year will need about $102,000 for health care, with an estimate of $206,000 per couple.

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Both estimations were based on a person or couple retiring this year at age 65.

The Boston College study said this is bad news for 60% of retiring or soon-to-retire workers who cannot afford to set aside funds like this.

In Fidelity’s study, the amount of money needed to cover old-age heath care costs has risen dramatically since the company first started projecting such needs in 2002. At that time, the per-couple needs were $65,000 less -- $160,000. The average increase per year over the six year tracking period has been nearly 6%.

Fidelity noted higher costs for doctor visits and other health care services, as well as costs tied to the use of newer medical technologies and out-of-pocket prescription drug costs were the main triggers for this rise. The company also noted the increase of certain medical conditions, such as diabetes, as fueling this rise.

In its study model, Fidelity assumes retiring couples have no retiree health coverage sponsored by their employers, and it includes expenses such as Medicare premiums, insurance co-payments and deductibles, as well as consumer-paid drug costs.

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