Rising Health Care Costs Could Consume as Much as 50 Percent
Of Retirees' Future Social Security Benefits

BOSTON, March 27, 2007 - A 65-year-old couple retiring in 2007 will need approximately $215,000¹ to cover medical costs in retirement², according to Fidelity Investments' latest health care cost estimate, released today. This figure is a 7.5 percent increase over the 2006 estimate of $200,000.

The retiree health care cost estimate is calculated annually by Fidelity Investments. Since the estimate first was computed in 2002, the number has risen a total of 34 percent, with an average annual increase of 6.1 percent.

The 2007 estimate assumes individuals do not have employer-sponsored retiree health care coverage and includes expenses associated with Medicare Part B and D premiums³ (32%), Medicare cost-sharing provisions -- co-payments, co-insurance, deductibles and excluded benefits (35%) -- and prescription drug out-of-pocket costs (33%). It does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care.

Since many retirees rely on Social Security as their primary source of income in retirement⁴, Fidelity also calculated the impact that a $215,000 health care liability would have on a retiree's Social Security benefit. It found that a 65-year-old worker today, who is earning $60,000 and decides to retire at the end of the year, should expect that 50 percent of his or her pre-tax Social Security benefit will be used to pay for personal health care expenses in the next 16 to 18 years.

"A significant amount of retirees told us their state of health is not good, they are spending more in retirement than they ever planned, and some were even forced into an early retirement due to health problems," said Brad Kimler, senior vice president, Fidelity Employer Services Company, a division of Fidelity Investments. "But if today's workers act now to take greater advantage of the many retirement savings vehicles available to them, they can create a more secure and enjoyable retirement."

Fidelity recommends that the first step every working American should take is to create an individual retirement plan. In building a plan, workers can factor in their specific circumstances such as current savings, anticipated income sources, lifestyle, expenses and likely health care needs in retirement.

New Laws Make Saving For Health Care Costs Easier

The Tax Relief and Health Care Act of 2006, enacted last December, brought important changes to the rules governing tax-advantaged Health Savings Accounts (HSAs). It created incentives for both employers and employees to better utilize HSAs in their respective efforts to help mitigate rising health care costs and save more for health care needs in retirement.

The most significant changes include:

•		Elimination of contribution limits that were previously tied to High Deductible Health Plan (HDHP) deductibles. In 2007, the new maximum contribution limits are $2,850 for individuals and $5,650 for families.
•		The ability for employers to initiate a one-time rollover of funds from an individual's health Flexible Spending Account (FSA) or Health Reimbursement Arrangement (HRA) to an HSA.
•		Setting of annual statutory contribution limits earlier in the year (June 1) so employers can better prepare for annual enrollment.

As of January 4, 2007, there were an estimated 3.6 million individual HSAs⁵ and that number is expected to grow to over 15 million by 2010⁶.

In addition to offering an HSA, employers should consider providing health guidance information and planning tools to their employees to help engage them in leading healthier lifestyles, understanding their personal health risks, and to equip them with strategies to better manage their current healthcare expenditures, while also planning for future health care costs.

New Tool Helps Employees Better Plan for Expected Costs

As of April 1, Fidelity will make available to employers a new tool to help employees plan toward their future health care liability. The tool enables employees to personalize, estimate and project their retiree health care costs based on such factors as age, expected retirement date, health conditions and available insurance coverage.

Using this tool, employees can determine whether they have saved enough to meet their estimated health care costs in retirement and also run savings models to determine their optimal annual HSA contribution amount. Employees can access this retiree health care cost planning tool via Fidelity's NetBenefits Web site and it is also available as part of the Fidelity HSA^SM.

About Fidelity Employer Services Company

Fidelity Employer Services Company (FESCo) is a division of Fidelity Investments. FESCo provides defined contribution and defined benefit retirement services, employer benefits and human resources administration, and payroll services to more than 20 million participants in the United States as of February 28, 2007.

About Fidelity Investments

Fidelity Investments is one of the world's largest providers of financial services, with custodied assets of $3.0 trillion, including managed assets of more than $1.4 trillion as of February 28, 2007. Fidelity offers investment management, retirement planning, brokerage, and human resources and benefits outsourcing services to more than 23 million individuals and institutions as well as through 5,500 financial intermediary firms. The firm is the largest mutual fund company in the United States, the No. 1 provider of workplace retirement savings plans, one of the largest mutual fund supermarkets and a leading online brokerage firm. For more information about Fidelity Investments, visit www.fidelity.com.

¹Fidelity Consulting, 2007

²Assumes no employer-provided retiree health care coverage and life expectancies of 17 years for a male and 20 years for a female

³Assumes use of Medicare Part D coverage

⁴ Fidelity Research Institute, 2007 Retiree Survey

⁵Information Strategies Inc. (ISI)

⁶Diamond Cluster, 2005

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Fidelity Investments Institutional Services Company, Inc.
82 Devonshire Street, Boston, MA 02109

Fidelity Brokerage Services, Member NYSE/SIPC,
100 Summer Street, Boston, MA 02110