In 2009, the cost of health care for a 65-year old couple entering retirement is 50% more than it was in 2002, according to Fidelity Investments. The nest-egg required for retirement health is $240,000, give or take tens of thousands depending on your health risks. In just the past year, this cost increased 6.7%, from $225K.

Fidelity has measured the cost of health care in retirement since 2002, when the cost was $160,000.

Note the assumptions behind this number: Fidelity assumes that retirees will not have employer-sponsored retiree health benefits, but will take up Medicare. Thus the $240K takes into account Medicare’s cost-sharing of deductibles and coinsurance for Part A (hospital), Part B (ambulatory care/physicians), and Part D (drug coverage).

However, the $240K does NOT include long-term care, dental, or medicines purchased over-the-counter.

Health Populi’s Hot Points: About one year ago, the Employee Benefits Research Institute (EBRI) published its 2008 Retirement Confidence Survey. In EBRI’s survey, Americans’ confidence in their ability to retire “comfortably” dropped to the lowest level in seven years prior to the survey. This eroding lack of confidence occurred across all age groups.

A top issue for retirees according to EBRI is health care costs; as of the April 2008 survey, nearly one-half of retirees said they had spent more than they expected to on health care expenses.

In EBRI’s May 2008 report, Savings Needed to Fund Health Insurance and Health Care Expenses in Retirement: Findings from a Simulation Model, EBRI calculated that for couples with employment-based retiree health benefits who supplement Medicare, but who must pay their own premiums, the savings needed for couples would range from $154,000 to $376,000.

Both Fidelity’s and EBRI’s calculations point to a new reality for most people looking at retirement in the next decade — that retiree health cost concerns will force people to look at staying in the work force longer. We’re not just workin’ for a livin’; we’re workin’ for the health care.

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