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Old 10-08-2015, 02:29 PM   #21
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There have been a few discussions on the Fidelity estimate for retirement health care. Their methodology is not public so the number has not been scrutinized, but it does get a lot of press. From a prior thread (here) , one reference to their calculation (here)
The Fidelity number is a possibility but we know it cannot be an average because we know that a large part of the senior population does not have the income and assets needed for that level of spending.
The Consumer Expenditure Survey has $5,849 per household for over 65 1.8 consumer units (aka people) per household, or $3,249 per person per year. And some of those consumer units might not be getting the best care or have money to spend on dental treatments not covered by Medicare, so we upped the amount in our retirement budget a bit.

The Fidelity estimates are from:

"Fidelity Benefits Consulting, 2014. Based on a hypothetical couple retiring in 2014, 65 years or older, with average (82 male, 85 female) life expectancies. Estimates are calculated for "average" retirees, but may be more or less depending on actual health status, area of residence, and longevity. The Fidelity Retiree Health Care Costs Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, Medicare. The calculation takes into account cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Medicare. The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care."

http://www.fidelity.com/inside-fidel...ra-health-care
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Old 10-08-2015, 02:42 PM   #22
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The Fidelity number is a possibility but we know it cannot be an average because we know that a large part of the senior population does not have the income and assets needed for that level of spending.
That statement confuses me MichaelB. Why couldn't the Fidelity number be an average with lower amounts spent by folks without the resources to spend more averaged with higher amounts spent by those that can afford to spend more?

I think the issue is that the fidelity number IS an average, a measure of central tendency, but with a wide dispersion of data around it. That is, likely some are spending much more and some much less than the Fidelity average number.
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Old 10-08-2015, 03:23 PM   #23
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I call BS on Fidelity. They do not disclose how they arrive at the number but you know they have a vested interest in making sure the number is high.
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Old 10-08-2015, 03:37 PM   #24
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I call BS on Fidelity. They do not disclose how they arrive at the number but you know they have a vested interest in making sure the number is high.
FIRE'd nine years with the past three on Medicare Parts A, B and D plus a supplement, I find the Fidelity estimate reasonable. I'd hate to be counting on much less. If it's high for you, so be it. I'm sure there are many people that are far above and far below their average number.

I'd worry more about an estimate that seemed too low. Getting caught in retirement needing much more for health care costs than planned could be a pita!

What's your estimate? And if your estimate is significantly lower than Fidelity's, how are you doing it?
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Old 10-08-2015, 03:46 PM   #25
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My experience with medicare has been managing my 93yr old mothers bills ( I'm still 10yrs away from it ). She does have retiree health plan as secondary. I just don't see these numbers. she has paid very little since being on medicare. No way could she have paid $200K+ in medical expenses... she has never seen that amount of money.

So if the couple is paying $200k+ does that mean they are running up bills in the range of $1.2M ( assuming they pay 20% and medicare is 80% )
As I tried to imply in my earlier post, I think the Fidelity estimate refers to billed charges, not the amounts paid, which would be much lower.
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Old 10-08-2015, 03:58 PM   #26
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FIRE'd nine years with the past three on Medicare Parts A, B and D plus a supplement, I find the Fidelity estimate reasonable. If it's high for you, so be it. I'm sure there are many people that are far above and far below their average number.

I'd worry more about an estimate that seemed too low. Getting caught in retirement needing much more for health care costs than planned could be a pita!

What's your estimate? And if your estimate is significantly lower than Fidelity's, how are you doing it?
+1
I'm not sure why people think that FIDO's estimate is high. If a couple have Medicare A, B and D plus a supplement their premiums may be around $600 per months which is $7200 per year. Any co-pays or dental work can easily bring spending to 10K. That's 300K for a 30 year retirement.

We're not on medicare but our insurance premiums through the ACA exchange are similar to medicare and we will spend 14K in healthcare this year due to extensive dental work.

Like you I don't want to underestimate our healthcare cost in retirement and that's why we budgeted 12K/year.
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Old 10-08-2015, 04:11 PM   #27
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This AARP article has a detailed break out of likely health care costs in retirement per person:

"Put it all together and you're looking at $3,069.80 a year for basic Medicare coverage, assuming you meet your hospital deductibles. And unless you stay out of a hospital altogether, you will meet the deductible."

Health Care Costs - Budget Your Retirement Savings - AARP

Adding up two people on Medicare, plus dental and other expenses not covered by Medicare, gets you to $5K per person per year. $10K a year for two X 25 years = $250K total retirement health care funding seems pretty reasonable to me.
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Old 10-08-2015, 05:08 PM   #28
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That statement confuses me MichaelB. Why couldn't the Fidelity number be an average with lower amounts spent by folks without the resources to spend more averaged with higher amounts spent by those that can afford to spend more?
I wrote average, probably should have said median. The Fidelity number is most likely neither. It's a projection, based on some combination of actual numbers and methodology.

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This AARP article has a detailed break out of likely health care costs in retirement per person:
Thanks for that link. Even that number is debatable, $3059 assumes the Med A hospitalization deductible is fully paid each year.

I'm not arguing that the Fidelity estimates should not be used, just that they are unaffordable at the median levels of income and assets. I think healthcare costs will be as high as each of us can afford. That industry has been very successful in grabbing an increasing share of disposable income, this has been happening steadily for about 3 decades, and there is no reason it will stop.
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