Americans Way Off on Estimating Health Costs in
Retirement
August 26, 2009 (PLANSPONSOR.com) - Americans are
expressing concern about paying for medical costs during
retirement - and dramatically underestimating the financial
burden they'll be expected to bear, a new survey
indicates.
According to a press release, the July survey of the
First Command Financial Behaviors Index reveals that 72% of
Americans are at least somewhat concerned about health care
costs in retirement, with those closest to retirement
expressing the most concern. Respondents predict that they
will need about $33,000 above traditional retirement
savings to cover health care costs during retirement - only
a fraction of the $166,000 in out-of-pocket expenses
estimated for someone retiring today and living to age
100.
Despite their concerns, less than one-third of
respondents include health care costs as part of their
retirement planning. Among those, half save less than $100,
36% save between $100 and $300, and 14% save more than
$300. Among non-retired Americans with a written financial
plan from a financial adviser, 41% include health care
costs as part of their retirement planning, nearly double
the percentage of those without a financial plan.
The announcement explained that current premiums for
Medicare Part B, the average for Medicare Part D, and the
maximum out-of-pocket drug costs before Medicare Part D
begins paying 95% of drug costs total $5,842 per year.
Assuming a 5% return on savings and an average premium
increase of 3.7% (the Part B increase rate through 2016),
an individual retiring at age 65 today and living to age
100 would need an estimated $166,000 to meet these
expenses. For a couple, the figure doubles to $332,000.
The latest annual estimate from Fidelity is that an
average couple retiring in 2009 would need $240,000 set
aside by age 65 in order to pay for health-care expenses in
retirement (see
IMHO: The Mean-ing of Average
).
More information is at
www.firstcommand.com/research
.
Rebecca Moore
editors@plansponsor.com