The annual estimate of future health care costs for retired couples saw its first ever decline according to a new report from Fidelity Investments.
The company estimates a 65-year-old couple retiring this year will need $230,000 to pay for medical expenses throughout retirement, not including nursing-home care. This represents an 8% decline from last year, when the estimate was $250,000.
Until this year, the estimate has increased an average of 6 percent annually since the initial calculation of $160,000 in 2002.
The $20,000 decline in the estimate from last year was driven by Medicare changes contained in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act, both signed into law in 2010. These changes, which reduced out-of -pocket expenses for prescription drugs for many seniors, resulted in the reduced estimate.
“While the savings generated through the health care reform laws is a welcome relief to many seniors, it should be considered a one-time adjustment, at least for the time being,” said Brad Kimler, executive vice president of Fidelity’s Benefits Consulting business. “Today’s workers still face the prospect of significant medical expenses in retirement and must begin to include those costs in their retirement plan strategies.
“Looking forward over the next few years, Americans should expect health care expenses to continue to increase annually due to a number of factors including higher costs for medical services, the introduction of new technology and an increased utilization of health care services like diagnostic testing,” Kimler added.