When boomers find out how much they’re likely to need to cover those medical costs—typically, about a quarter of a million dollars, the experts say—they might wish they hadn’t asked. “All those plans for cruises go out the window if you don’t have adequate coverage,” said Alexis Abramson, a New York based gerontology expert. But understanding what kinds of costs and calculations lie behind that number can make it less intimidating, and help you prepare.
Fidelity Investments, which oversees some 12 million 401(k) accounts, has been a bellwether in setting expectations on this topic. This spring, for example, it released a study saying that an average 65-year-old couple retiring in 2012 would need to have saved up $240,000 to pay for out-of-pocket health-care costs in retirement.
And that’s $240,000 in today’s dollars, so a couple retiring in 10 years would need the inflated-adjusted equivalent in the year 2022. (In its 11 years of doing this study, Fidelity has found the rate of health-care inflation to average 6% per year; assuming that rate stayed constant, a 2022 retiree would need about $430,000 set aside.)