In determining the total amount of savings to accumulate for retirement, it is necessary to add what will be needed for health care costs to the amount needed to provide a desired level of continuing inflation-adjusted income.

The latest retiree health care cost estimate from Fidelity Benefits Consulting estimates that a 65-year-old couple retiring today will need an average of $275,000 (in today's dollars) to cover medical expenses during their retirement years. Of course, this estimate will change as the cost of healthcare changes.

For many couples, these costs will be one of the largest expenses that occur and must be paid for during their retirement years. It is also important to consider that this estimated cost does not include costs associated with nursing-home care and was calculated assuming the presence of Medicare insurance coverage.

An important determinant of your estimated health care cost is your age when you begin retirement. Currently, the estimated extra savings needed is $17,000 for each year when retiring before age 65 to cover costs prior to Medicare eligibility, insurance premiums, and out-of-pocket expenses. For a couple retiring at age 62 instead of age 65, the estimated additional savings needed will be $51,000. In this case, the total extra retirement savings would total $271,000. For couples retiring later than age 65 the estimated savings needed will be less. If retirement is deferred to age 67, Fidelity estimates savings of $10,000 per year for a reduced total savings need of $200,000.

Greg Tinaglia

(last updated 04.16.2018, increasing the average amount that a 65-year-old couple will need based on the most recent update from Fidelity Benefits Consulting)