Retirement and Healthcare Savings Update

Good news for anyone in retirement or retiring soon: The amount of savings needed to cover health insurance premiums and out-of-pocket care expenses fell for a second straight year, according to the Employee Benefits Research Institute (EBRI).

Okay, get ready for the governmental alphabet soup! The savings needed to pay Medigap premiums, Medicare Part B premiums, Medicare Part D premiums, and out-of-pocket drug expenses (if you retired at age 65 in 2014) was estimated to be:

For men:

  • $64,000 (50% chance of savings covering all expenses)
  • $93,000 (75% chance of savings covering all expenses)
  • $116,000 (90% chance of savings covering all expenses)

For women:

  • $83,000 (50% chance of savings covering all expenses)
  • $106,000 (75% chance of savings covering all expenses)
  • $131,000 (90% chance of savings covering all expenses)

For married couples:

  • $147,000 (50% chance of savings covering all expenses)
  • $199,000 (75% chance of savings covering all expenses)
  • $241,000 (90% chance of savings covering all expenses)

That’s 2-10 percent less than the savings needed in 2013. How is it possible these estimates are moving lower? Retiree spending on healthcare has dropped, according to U.S. News & World Report:

“A flood of 77 million people from the baby boomer generation have been turning 65, the age of Medicare eligibility, since 2011. These younger enrollees have been a leading factor driving down the rate at which health care spending is increasing, because the younger boomers tend to be healthier than older enrollees and therefore use fewer medical services… Also contributing to the slowdown are changes in the way medicine is being practiced, the lingering effects of the Great Recession, and the shift in usage from high-priced prescription drugs to less costly generic alternatives.”

EBRI’s estimates use Congressional Budget Office and Centers for Medicare & Medicaid Services projections regarding future premium and health care cost increases. These projections for spending growth have slowed in recent years.

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