EBRI Pinpoints Retiree Health Expenses

June 3, 2008 (PLANSPONSOR.com) - A 65-year-old man would need $122,000 in current savings for a 90% chance of having enough to cover retiree health costs and $64,000 to have a 50% chance of funding his health care needs, a new study found.

A news announcement from the Employee Benefit Research Institute (EBRI) said the data was part of its study of how much savings would be required to pay for post-retirement health coverage insurance premiums and out-of-pocket health expenses. The estimate for the 65-year-old man assumed supplementing Medicare with retiree health benefits from a former employer with premiums subsidized by a former employer.

EBRI also found:

• A woman would need current savings of $86,000 to have a 50% chance of having enough money for retiree health expenses, or $140,000 for a 90% chance.
• A married couple would need current savings of $154,000 to have a 50% chance of having enough money for retirement health costs, or $235,000 for a 90% chance.

In its study report, EBRI said separate estimates covered individuals and couples who supplement Medicare with employment-based retiree health benefits and those who use a combination of individual health insurance through Medigap and Medicare Part D outpatient drug coverage. In each case, EBRI presented estimates for individuals and couples to determine the assets needed to cover retiree health costs 50%, 75%, and 90% of the time.

EBRI's estimated costs for a 65-year-old individual who supplements Medicare with retiree health benefits from a former employer but the premiums are not subsidized by a former employer:

• A man would need $102,000 in current savings to have a 50% chance of having enough money to cover health care expenses in retirement, or $196,000 in current savings for a 90% chance.
• A woman would need current savings of $137,000 to have a 50% chance of having enough money for retiree health expenses, or $224,000 to have a 90% chance.
• A married couple would need savings of $246,000 to have a 50% chance of having enough money for retirement health costs, or $376,000 for a 90% chance.

EBRI researchers pointed out that the gender differences are driven by differing longevity experience between men and women.