Health savings needed for retirement have come down (but they’re still high)

December 2, 2010

Employee Benefit Research Institute has just published an issue brief that estimates how much money someone retiring at 65 will need to pay for health care costs throughout retirement.  The good news: due primarily to the closing of the Part D “doughnut hole,” costs have dropped significantly since 2008, the last time EBRI did this analysis. The bad news: it’s still quite a lot of money.

This latest issue brief from EBRI has been picked up widely on line; you can see a nice summary of the results or download the full report at the EBRI link above or in the US News and World Report Money blog. We thought it would be interesting to compare just how much the reduction in total savings required would be, and so we created the table below based on the numbers in the two reports. Note that a married couple who wanted to have a 90% chance of having enough money to pay all their bills would need to have saved more than $600,000 in 2008; in 2010, that number has dropped more than 38% to $391,000. Individuals, both men and women, are looking at even larger percentage drops in total outlay. The numbers are still daunting, but any downward trend in health care expense is welcome in this age of ever-increasing costs.

Savings Needed for Medigap Premiums, Medicare Part B Premiums, Medicare Part D Premiums, OOPE for Retirement at Age 65 in 2008 vs. Retirement at Age 65 in 2010 
2008 2010
  Median Prescription Drug Expenses Throughout Retirement 75th Percentile of Prescription Drug Expenses Throughout Retirement 90th  Percentile of Prescription Drug Expenses Throughout Retirement Median Prescription Drug Expenses Throughout Retirement 75th Percentile of Prescription Drug Expenses Throughout Retirement 90th  Percentile of Prescription Drug Expenses Throughout Retirement
Men            
Median $  79,000 $  93,000 $ 156,000 $  65,000 $  79,000 $ 100,000
75th percentile 122,000 144,000 248,000 97,000 118,000 147,000
90th percentile  159,000 189,000 331,000 124,000 151,000 187,000
Women            
Median 108,000 127,000 217,000 93,000 105,000 131,000
75th percentile 143,000 170,000 296,000 121,000 137,000 170,000
90th percentile 184,000 220,000 390,000 152,000 173,000 213,000
Married Couples            
Median 194,000 228,000 390,000 158,000 184,000 231,000
75th percentile 253,000 299,000 518,000 218,000 255,000 317,000
90th percentile 305,000 363,000 635,000 271,000 317,000 391,000
Source: EBRI, 2008 and 2010

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