This figure—and clearly it’s just an estimate—is based on the expected cost of premiums for Medicare Part B and Medicare Part D, plus the cost of co-payments, deductibles, and out-of-pocket prescription drug costs. It does not include dental care, over-the-counter prescriptions, or long term care (ie nursing home costs).
It’s important to realize that this figure is based on the fact that the average life expectancy for a man at age 65 is 15 years and for a woman is 20 years. Actually, a 65-year old white man will, on average, live another 16.6 years; a 65 year old white woman will live 19.5 years; a 65 year old black man can expect to live another 14.6 years; and at age 65, a black woman will, on average, live for 18.3 years (see Health United States, 2005). Since these are averages, some people will live less long, and others a good deal longer.
Fidelity’s estimate assumes the couple will enroll in Medicare but have no supplementary employee health insurance coverage. Increasingly, corporations are discontinuing their medical care coverage for retirees in order to save money, so couples should not count on having such benefits. Out-of-pocket medical costs are the single largest expense for most retired couples, so start saving now!