Many Americans greatly underestimate the amount of savings they may need to cover health care costs in retirement, according to a new study from Fidelity Investments, a Boston-based financial-service firm that offers an array of retirement savings plans.
In a recent survey of people between the ages of 55 and 64, nearly half of respondents said they believe they will need about $50,000 to pay for their individual health care costs in retirement. But based on Fidelity’s annual Retiree Health Care Cost Estimate, the average couple can expect to spend more than $220,000 in health care expenses over the course of their retirement.
Keeping fit helps to keep retirement health care costs down. And large health care costs can quickly eat into retirement savings. So watching your weight and staying active can be a good way to protect retirement income, Fidelity suggests.
Or as Fidelity executive vice president John Sweeney noted, “Not only can an apple a day keep the doctor away, it can very well help to protect your nest egg too.”
Fidelity ran some numbers based on a person with a pre-retirement income of about $80,000. If that person is in poor health, he or she may need an income replacement ratio as high 96 percent of their pre-retirement income to cover additional medical expenses. In contrast, a person in excellent health might be able to get by with just a 77 percent replacement ratio.
“Making smarter decisions about your health means you’re making smarter financial decisions, particularly when it comes to retirement,” Sweeney said in a statement.