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The Annual Fidelity Retiree Health Care Cost Estimate Report: A Review

According to Fidelity, a couple will need $315,000 to pay for healthcare costs over the course of their retirement. Should you be worried?

Fidelity's annual Retiree Health Care Cost Estimate Report gets a lot of attention. According to the report, an age-65 couple retiring today will need $315,000 to pay for healthcare costs over the course of their retirement. The numbers that are reported have created fear amongst people who are already concerned about outliving their savings. It makes people wonder whether or not they have the financial resources to pay for healthcare costs they may incur during retirement.

Jae Oh, author of Maximize Your Medicare, sits down with Robert “Mr. Retirement” Powell to review Fidelity's annual Retiree Health Care Cost Estimate Report and why there’s no need to worry. Oh says that although he doesn’t dispute the way that they've created this number or projected those numbers going forward, he makes a point that this amount could be paid over time. This is the same as paying about $15,000 per year, over the course of a 20 year lifespan. That number seems much more manageable than setting aside $315,000 to be paid all at once.

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Oh goes on to say that most people are going to be receiving Social Security, and those with retirement savings and those who are taking advantage of the Secure Act will manage their redemptions or withdrawals from qualified funds in order to pay for Part B premiums as they incur them. It is also not entirely clear what they did about Medicare advantage or Medigap, meaning that Medigap could cost extra money which would be added on top of that. However, Oh points out that if you went to the hospital and you needed ongoing healthcare services, you wouldn't have any further costs.

So while the number is alarming, certainly shocking to many, the reality is that as you look through the numbers and think about how you are actually incurring the costs, it's not as bad as you might think. Maybe it's a good place to at least start having the conversation about how you will pay for healthcare expenses in retirement and what the options are, whether it's Medicare Advantage or Medigap or just the original Medicare. Nevertheless, Medicare Part A and Part B, even with Medigap or a Medicare Advantage plan, are still not a solution for long-term care.

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