Health care costs in retirement are a growing concern for many, but a new research report claims to find a silver lining — of sorts.
The report by the Employee Benefit Research Institute (EBRI), an update of previous computer modeling of retiree health savings needs, found that the savings targets for such expenses declined between 2% and 10% between 2013 and 2014. This follows a similar EBRI analysis from a year earlier that found that savings targets for post-retirement health expenses (other than nursing home and home health care costs) declined between 6% and 11% between 2012 and 2013 for a person or couple age 65.
That said, the projected savings needs are not insignificant; for a married couple both with drug expenses at the 90th percentile throughout retirement who wanted a 90% chance of having enough money saved for health care expenses in retirement by age 65, the targeted savings figure was $326,000 in 2014, compared with $360,000 in 2013. For singles, a man who wanted to have a 90% chance of having enough savings would need $116,000, while a woman (who would be expected to live longer) would need $131,000.
The report explains that many individuals will need more than the amounts cited in this particular report. For example, those figures do not factor in the savings needed to cover long-term care expenses, nor do they account for the fact that many individuals retire prior to becoming eligible for Medicare. Some, of course, may need to save less if they choose to work past age 65 and continue to receive health benefits as an active worker.
In 2011, Medicare covered 62% of the cost of health care services for Medicare beneficiaries ages 65 and older, while out-of-pocket spending accounted for 13% and private insurance covered 15%.
Of course, there is a wide variety of possible outcomes, depending not only on the age at which an individual retires, but, as the EBRI report acknowledges, also the length of life after retirement, the availability and source of health insurance coverage after retirement to supplement Medicare, their health status and out-of-pocket expenses, the rate at which health care costs increase, the impact of interest rates and other rates of return on investments, and possible future changes in public policy ? not to mention the targeted probability of success of those targets.
