The good news is that Americans are saving more for their golden years. But the task just got harder as a key retirement cost increased this year.
One in five American workers increased their retirement savings from last year, the highest level in five years, according to a new Bankrate.com survey. Only one in 20 haven’t saved at all this year or last year, a new low for the study.
“Both readings are indicative of an improving economy, where people are earning more and saving more," said Greg McBride, Bankrate.com’s chief financial analyst, in a statement.
The results come as Fidelity Investments increased its estimates for health care costs for the newly retired. A 65-year-old couple retiring this year faces $260,000 in health care costs during their golden years, up 6 percent from $240,000 last year and the highest level since the company began putting out estimates in 2002.
Fidelity attributes this year’s hike is to rising drug costs and the increase in the use of medical services.
The estimate is based on a couple who has traditional Medicare insurance coverage and adds up the monthly expenses from Medicare premiums, co-payments and deductibles along with out-of-pocket costs for prescription medicine.
Additionally, Fidelity estimates that the same healthy couple would need $130,000 more to cover long-term care expenses, which is limited under Medicare coverage. That includes a policy with an $8,000 max monthly benefit and three years of benefits and adjusts 3 percent each year for inflation.
Americans remain concerned about how they will pay health care expenses in retirement. Three out of five cited this as a worry in a separate survey from Edward Jones.
"Healthcare expenses can be difficult to project, especially when you are decades away from retirement," said Scott Thoma, principal and investment strategist for Edward Jones, in a statement. "Unexpected conditions and medical expenses that manifest later in life pose a great threat not only to physical and mental health, but also to the financial well-being of both the care receiver and the caregiver. That's why it is critical to start preparing early.”