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Have an Extra Quarter Million - You'll Need It to Cover HC Costs in Retirement

Posted Dec 07 2010 9:00am

The nonpartisan Employee Benefit Research Institute (EBRI) has released new figures on what retirees need to have in their nest egg in order to fund their health care costs assuming they retire at 65. Men retiring in 2010 will need anywhere from $65,000-$109,000 in savings to cover health insurance premiums and out-of-pocket expenses in retirement if they want an even chance of being able to have enough money; to improve the odds to 90 percent, they'll need between $124,000-$211,000.

Women retiring this year at 65 will need even more: between $88,000-$146,000 in savings if they are comfortable with a 50 percent chance of having enough money, and $143,000-$242,000 if they want a 90 percent chance.

The new EBRI analysis details how much savings an individual or couple will need to cover Medicare and outof-pocket health care expenses in retirement. Some prior estimates have been revised downward because of Medicare Part D (prescription drug) cost sharing that will be phased in by 2020 due to the Patient Protection and Affordable Care Act of 2010.
As I have been saying Paul Fronstin, director of EBRI's Health Research and Education Program, and a co-author of the report reiterates, “Because employers are continuing to scale back retiree health benefits, and policymakers may soon begin to address Medicare's funding shortfall, more of the financial costs of health care will be shifted to Medicare beneficiaries in the future."
The analysis deliberately does not factor in the savings needed to cover long-term care expenses or the fact that many people retire prior to becoming eligible for Medicare.
Persons currently at age 55 will need even greater savings when they turn 65 in 2020. For men retiring in 2020 range you’ll need $111,000 to $354,000, while needed savings for women range from $147,000 to $406,000 (in 2020 dollars), depending on their source of health insurance coverage to supplement Medicare, any employer subsidies, prescription drug use, and their savings goal.
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