Some retirees on Medicare may need to save nearly half a million dollars to cover health care costs in retirement, according to a new national analysis.
A report from the Employee Benefit Research Institute found that certain couples could need as much as $469,000 to have a strong chance of paying medical expenses throughout retirement.
The study examined how much money Medicare households might need to cover premiums, out-of-pocket costs and prescription drugs.
Researchers found costs vary widely depending on health conditions, prescription drug use and the type of Medicare coverage.
In one high-cost scenario, a couple with significant prescription drug expenses would need $469,000 in savings to have a 90% chance of covering their health care costs in retirement.
Couples enrolled in Medigap plans could also face steep savings targets. A couple with average Medigap premiums would need about $267,000 to have a 50% chance of covering retirement health costs and $405,000 to reach a 90% likelihood.
Single retirees may need substantial savings as well.
A 65-year-old man with a Medigap plan and average premiums would need about $120,000 to have a 50% chance of covering retirement health expenses, while a woman would need about $146,000. To reach a 90% probability, those savings targets rise to $212,000 for men and $252,000 for women.
Savings estimates were generally lower for people enrolled in Medicare Advantage plans.
A man with median prescription drug costs in Medicare Advantage would need about $61,000 in savings to have a 50% chance of covering retirement health expenses and $106,000 for a 90% chance. A woman in the same situation would need about $74,000 and $125,000, respectively. Couples would need about $135,000 for a 50% chance and $203,000 for a 90% chance.
Researchers said the Inflation Reduction Act’s new $2,000 annual cap on Medicare Part D prescription drug costs, which begins in 2025, will offer some financial protection for retirees.
Still, health care costs remain a major financial challenge even for people covered by Medicare.
“Health care costs remain a major financial challenge in retirement, even for people covered by Medicare,” said Paul Fronstin, director of health benefits research at EBRI. “While the new Medicare Part D out-of-pocket cap offers important financial protection, our analysis shows many retirees will still need significant savings to have a reasonable chance of covering health care expenses throughout retirement.”
The report also noted Medicare does not cover all health expenses and the estimates do not include long-term care or services such as dental and vision.
“Retirees and workers nearing retirement should not assume Medicare will fully shield them from potentially high health care costs,” said Jake Spiegel, senior research associate at EBRI.
FingerLakes1.com is the region’s leading all-digital news publication. The company was founded in 1998 and has been keeping residents informed for more than two decades. Have a lead? Send it to [email protected].