Research from Fidelity Investments'® Retirement
Savings Assessment study1 finds Americans are increasingly
concerned about health care costs in retirement, with 84 percent of
respondents wondering whether they will be able to cover them. The
problem may be even greater than they think: almost three-quarters (71
percent) of respondents expect to have better-than-average health in
retirement-an overly optimistic assumption for many, since the Centers
for Disease Control and Prevention report that 35 percent of U.S. adults
are considered obese2 and only 20 percent meet the Centers'
overall physical activity recommendations2.
Fidelity's research3 suggests many Americans greatly
underestimate the amount of savings they may need to cover health care
costs in retirement. A study last year of pre-retirees (ages 55-64)
found that nearly half (48 percent) of respondents believe they will
need about $50,000 to pay for their individual health care costs in
retirement. In contrast, Fidelity's annual Retiree Health Care Cost
Estimate, which has estimated the cost of healthcare in retirement every
year for more than a decade, has found that the average couple could
expect to spend more than $220,000 in healthcare expenses over the
course of their retirement.
In addition to underestimating these costs, many people are unaware of
the long-term financial impact that making positive health decisions can
have. When asked which resolution is more important to keep-financial or
physical fitness-a recent Fidelity study4 revealed that 53
percent of respondents said they'd prefer to keep financial fitness
resolutions, compared to 43 percent opting for physical fitness.
However, many don't realize the significant connection between the
two-and the importance of focusing on both-especially when it comes to
health care costs in retirement.
"Making smarter decisions about your health means you're making smarter
financial decisions, particularly when it comes to retirement," said
John Sweeney, executive vice president of Retirement and Investing
Strategies at Fidelity. "Being in good health will probably mean you'll
be more active in retirement-and you'll likely be able to spend
more on discretionary expenses such as travel. It's also clear that
doing all you can to stay healthy can make a big difference on essential
costs as well, because you won't have to spend that money on medical
expenses. Simply put, not only can an apple a day keep the doctor away,
it can very well help protect your retirement nest egg, too."
Addressing the retirement health care challenge
Fidelity's Retiree Health Care Cost Estimate tells only part of the
story. With longer life spans, medical costs rising faster than general
inflation, declining retiree medical coverage by private employers and
funding challenges for Medicare and Medicaid, managing health care costs
is expected to remain a critical challenge for retirees for some time to
come. That's why the importance of maintaining a healthy lifestyle
cannot be understated.
For example, Fidelity estimates an individual with a pre-retirement
income of approximately $80,000 and in poor health5 may need
an income replacement ratio as high as 96 percent of his or her
pre-retirement income each year, or approximately $76,800. Conversely,
that same person in excellent health might need just 77 percent, or
$61,600, a nearly 20 percent difference. To illustrate this, Fidelity
has created an iteractive
chart and infographic
that demonstrates the connection between health and retirement income
To help plan for retirement healthcare costs, Fidelity suggests the
Fidelity Offers Resources to Help Meet Retirement and Health Savings
For additional information, Fidelity offers educational articles,
roadmap: 12 rules of the road," which outlines key steps in planning
this financial journey, "Five
ways to protect your retirement income," providing rules of thumb on
protecting savings and income for those approaching retirement, and a Retirement
Roadmap special edition devoted exclusively to retirement planning.
For additional information on Health Savings Accounts, Fidelity offers "Three
Healthy Habits for Health Savings Accounts" and Fidelity's workplace
education program, Plan
for Life, provides HSA account holders with resources to assist them
with contributions and investment guidance related to the product.
About Fidelity Investments
Fidelity Investments is one of the world's largest providers of
financial services, with assets under administration of $4.7 trillion,
including managed assets of $2.0 trillion, as of February 28, 2014.
Founded in 1946, the firm is a leading provider of investment
management, retirement planning, portfolio guidance, brokerage, benefits
outsourcing and many other financial products and services to more than
20 million individuals and institutions, as well as through 5,000
financial intermediary firms. For more information about Fidelity
Investments, visit www.fidelity.com.
Investing involves risk including the risk of loss.
Fidelity Investments and Fidelity are registered service marks of FMR
Fidelity Brokerage Services LLC, Member NYSE, SIPC900
Salem Street, Smithfield, RI 02917
Fidelity Investments Institutional Services Company, Inc.500
Salem Street, Smithfield, RI 02917
National Financial Services LLC, Member NYSE, SIPC200
Seaport Boulevard, Boston, MA 02110
© 2014 FMR LLC. All rights reserved.
1 SOURCE: The Retirement Savings Assessment (RSA) was
the result of a national online survey of 2,265 working households
earning at least $20,000 annually with respondents age 25 and older from
June through October, 2013. Data collection was completed by GfK Public
Affairs and Corporate Communication using GfK's KnowledgePanel®, a
nationally-representative online panel, which is not affiliated with
2 SOURCE: Centers for Disease Control and Prevention,
September 2012, May 2013.
3 SOURCE: The HSA survey was conducted by GfK Public
Affairs & Corporate Communications from February 4th to 20th, 2013. The
study was conducted among a nationally representative sample of 1,836
U.S. adults ages 25-64 with a household income of $25,000 or more.
Respondents also have primary or shared responsibility for household
financial decisions and receive healthcare benefits through their own or
their spouse's employer.
4 SOURCE: The 4th annual New Year Financial
Resolutions Study was a telephone survey conducted among two
national probability samples, consisting of 2,027 adults, 18 years of
age and older. Interviewing for this CARAVAN® Survey was completed on
November 7-11, 2013 by ORC International, which is not affiliated with
5 SOURCE: Based on Retirement Savings Assessment research.
The working assumption for "poor health": five chronic conditions during
retirement and five prescription medications needed.
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