Retiring soon? Better have a lot stashed away to cover the cost of health care

March 7, 2023

Many Americans underestimate how much they will need to spend on health care during retirement, writes Kerry Hanson, a senior columnist for Yahoo! News.

Updated numbers from the Employee Benefit Research Institute, a nonprofit and nonpartisan organization, show how important it is to accurately account for health care expenses.

According to this latest research:

  • A 65-year-old man enrolled in a Medigap plan with average premiums will need to have saved $96,000 to have a 50% chance of covering premiums and prescription drug costs. To increase the odds of covering 90% of the cost, the man should have saved $166,000.
  • A 65-year-old woman will need to have saved $116,000 to cover 50% of her costs. (Because she is likely to live longer). To cover 90% of her costs, she needs to have saved $197,000.
  • A couple with particularly high prescription drug spending will need to have saved $383,000 to have a 90% chance of having enough money to cover their health care costs in retirement.
  • Important note: These estimates do not include the costs of long-term care, vision or dental care.

“Medicare does not cover all health care costs,” Paul Fronstin, director of health benefits research at the Employee Benefit Research Institute, told Yahoo Finance.

 “As a result,” he said, “many Medicare beneficiaries purchase Medigap or enroll in Medicare Advantage plans to help offset the out-of-pocket costs of health care. They also enroll in Part D prescription drug plans. The combination of premiums for supplement coverage and out-of-pocket expenses can put a huge strain on the finances of Medicare beneficiaries.”

What do you think? Are you retired or thinking of retiring, but worried about your health care costs? Share your stories with Voices for Affordable Health.