What will you and your spouse do with $351,000 when you retire?
That may sound like a nice nest egg, but recent research shows that every penny you spend just to cover medical expenses in retirement, such as Medicare premiums and drugs after insurance pays a portion. may also be required.
And that number is modest, the study notes.
Americans are already short on retirement savings. A New York Life survey of 2,202 adults last month found that although 74% expect to retire at age 64, only four in 10 have a nest egg. It was shown that there is. This shortfall means that many retirees may have their golden years tainted by financial stress.
“People have so many different financial goals and are going in a million different directions, so they don't always realize how expensive health care costs can be.” , said Jake Spiegel, an associate at the nonpartisan nonprofit Employee Benefits Research Institute (EBRI). Co-author of the Health Savings Report.
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How much should you save for medical expenses in retirement?
Assuming the retiree is enrolled in Medicare Parts A (hospital), B (medical), D (pharmaceutical), and G (costs such as coinsurance and copays not covered by Parts A and B), the retirement The report states that the amount a person will need by age 90 is: Probability of being able to cover medical expenses including insurance premiums and copayments %:
- A 65-year-old man who pays average premiums would need $184,000 in savings, and a woman would need $217,000.
- Couples will need $351,000.
- As an extreme example, a couple with particularly expensive prescription drugs would need $413,000 (taking into account the Anti-Inflation Act's out-of-pocket drug caps).
It is important to note that these estimates do not include services that are not covered by Medicare, such as dental, vision, and hearing.
These also do not include long-term care, such as the “huge” cost of community care, residential care and home care, Spiegel said.
Research from senior living research firm Seniorly shows that monthly assisted living costs can reach $8,248, and home care costs can total $3,861.
Based on current income and savings rates, it would take the average American 17.2 years to save up one year's worth of living assistance, the report said.
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Why are retiree health care costs so high?
Spiegel said rising Medicare premiums, the program's shaky financial base, which leaves the amount of Medicare's full coverage uncertain for years to come, and cuts to employment-based retiree health care programs all contributed to this. He said there was.
For the past 20 years, health care costs have far exceeded inflation.
According to nonprofit health researchers, health care costs, including services provided, insurance, drugs and equipment, rose 114.3% from January 2000 to June 2023, compared to all consumer goods and services. The price has increased by 80.8%. KFF.
“Health care costs tend to increase two to three times faster than Social Security income (cost of living) increases,” says Mary, Social Security and Medicare policy analyst at the nonprofit advocacy group Senior Citizens League. Mr. Johnson says. It turns out that one in five seniors spends more than $1,000 a month on medical expenses.
“So many retirees don't have the savings to cover these costs, and that can have far-reaching implications for other families who want to help in some way,” Mr Johnson said. .
What can we do to help the elderly?
Financial advisers and medical experts say some of these moves could help ease the burden on older adults.
- law amendment EBRI's Spiegel said cutting benefits, raising taxes on workers, or a combination of the two could help strengthen Medicare.
- early planning, save money by putting money into a Health Savings Account (HSA) and remodeling your home so you can stay in it for as long as possible. Also, consider long-term health insurance.
- Instead of signing up for Medicare, Seniors can purchase Medicare Advantage, also known as Medicare Part C, which is an all-in-one alternative to Original Medicare. Many of these plans have $0 premiums and offer benefits such as dental, vision, and voice services.
A 65-year-old man with a Medicare Advantage plan will need $99,000 90% of the time to meet his medical needs. For women, $116,000 is required. According to the EBRI report, the amount is about $189,000.
Although these are significantly lower savings targets, “Medicare Advantage plans often have limited networks and may require approval before certain drugs and services are covered,” the paper notes. ing.
Medora Lee is USA TODAY's money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
