Cost of health care for future retirees drops to $230,000… That’s if you and your spouse both don’t retire until age 65.

I hope a decline of $20,000 in the amount you will need for health care in retirement from a quarter million to only $230,000 gives you a warm and fuzzy feeling.  I also hope that you are planning on working until age 65 because if not, you will likely need at lot more money.

Frankly, I think that estimate is a bit optimistic. For example, if you take today’s Medicare premium for a couple plus the cost of Medigap coverage times a life expectancy of eighteen years at age sixty-five, you get premium costs of over $150,000 and that does not account for annual increases in premiums or for out-of-pocket health care costs. Now how warm and fuzzy do you feel? Add to that perhaps ten thousand dollars a year for each year you retire before age 65 and the heat is really on. Oh yes, don’t forget the increased taxes and Medicare premiums to pay for added Medicare benefits.

Following is a clip from a Fidelity Investments press release. If you want to read the full text click here.

BOSTON – Fidelity Investments® (“Fidelity”), a leading provider of employer benefits, today announced the first-ever decline of its annual estimate of future health care costs for retired couples.  Fidelity® estimates a 65-year-old couple retiring this year will need $230,0001  to pay for medical expenses throughout retirement, not including nursing-home care.  This represents an 8 percent decline from last year, when the estimate was $250,000.

The annual health care costs estimate, now in its 10th year, is calculated by Fidelity’s Benefits Consulting business, which helps employers assess and design their workplace benefits programs.  Until this year, the estimate has increased an average of 6 percent annually since the initial calculation of $160,000 in 2002.

The $20,000 decline in the estimate from last year was driven by Medicare changes contained in the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act, both signed into law in 2010.  These changes, which reduced out-of -pocket expenses for prescription drugs for many seniors, resulted in the reduced estimate.