If you are concerned about your health care costs in retirement you are not alone. You are in the company of 72% of Americans who are at least "somewhat concerned" about their health care costs in retirement.

Rebecca Moore's article in PLANADVISOR titled Americans Way Off on Estimating Retirement Health Costs includes interesting information from last month's survey of the First Command Financial Behavior's Index. The survey found that Americans are concerned about their medical costs during retirement. In addition, Americans are "dramatically underestimating the financial burden they'll be expected to bear."

Ms. Moore mentions this year's annual findings of health care costs in retirement from Fidelity Investments. According to the Fidelity press release, "A 65-year-old couple retiring in 2009 will need approximately $240,000 to cover medical expenses in retirement even with Medicare insurance coverage, according to Fidelity Investments’ latest health care cost estimate." The Fidelity study assumes no employer-provided retiree health care coverage and life expectancies of 17 years for a male and 20 years for a female

The health care cost data released by Fidelity is potentially much lower than what a couple will actually need. An individual’s health care costs are affected by a number of factors including health care coverage, life expectancy, and health status. Take a look at how much the $240,000 can increase based on a couple of changes:

#1) The couple lives to their average life expectancy:
Add an additional $134,000
In this scenario, the male lives to 86 (instead of 82 in the Fidelity example) and the female lives to 90 (instead of 85 in the Fidelity example). They will need approximately $374,000 to cover medical expenses in retirement.

#2) The male has Type 2 Diabetes:
Add an additional $25,000 
Please note that Type 2 Diabetes generally decreases life expectancy but for the sake of this example, the male’s life expectancy remains at 82 like the Fidelity example.

An individual’s life expectancy can vary by 20 years and annual health care costs can vary by 50% based on one’s health profile. Understanding your personal situation and expected health care costs in retirement is a critical step to planning for your future financial needs.