Another burden facing retirees in the relatively near future is rapidly growing health care costs. A 65-year old couple who retires in 2012 should plan for $240,000 for medical costs, according to a study by Fidelity, provided the couple does not receive employer-sponsored health coverage. This figure, on average, has risen 6% annually since 2002.
Diane Pearson, a financial adviser at Legend Financial Advisors in Pittsburgh, says higher health care costs in recent years have changed the way she has counseled clients on retirement. She used to try to get her clients’ nest eggs to accrue 2% more than inflation each year, but now that number is close to 6% due to rising health costs.
“People generally underestimate the amount of money they’ll need in retirement,” Pearson says, noting that health care predictions play a major role in that underestimation. “The rule of thumb has been spending 75% to 85% in retirement of what you were spending while you were working full-time. I think that’s absolutely false.” Pearson says the amount spent in retirement likely will be about the same spent in your working years.
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