By JANE J. KIM DOW JONES NEWSWIRES (Excerpt) Spending on health care represents one of the largest expenses in retirement. Yet people drastically underestimate how much they need to save because they are counting on Medicare or their employers to pay their bills.

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In fact, actual costs are usually five times as high -- yes, five times -- as what individuals tend to estimate, according to the Employee Benefits Research Institute, a nonprofit research group in Washington.

According to the EBRI, individuals will need to have saved anywhere from $80,000 to $700,000 to pay for their health-care expenses in retirement, even with the new Medicare drug benefit, said Paul Fronstin, director of EBRI's health research and education program.

As daunting as those figures appear, there are steps that can be taken to reduce future costs and get a handle on potential expenses. But the first step is facing the reality.

Medicare typically covers about half of the average person's medical expenses, and companies have been slowly chipping away at the retiree benefits of their former employees. A study by Watson Wyatt Worldwide, a benefits consulting firm in Washington, estimated that the level of employer financial support will drop to less than 10% of total retiree medical expenses by 2031, under plan provisions already adopted by many employers. Click link below to read complete article (note: some sites require subscriptions) http://online.wsj.com/article_email/0,,SB108440336526010101-IBjeoNhlaB3m5ymZ3SHaqiFm4,00.html

source: WSJ