Data and Research

Research Finds Retirement Planning Calculators Lacking

By Rebecca Moore | November 10, 2015
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“In fact, most employees only pay around 25% of their actual health care premium costs, while employers pick up 75%. In their first year of retirement, for comparable coverage, they will have to pay out of pocket costs around three times what they paid as employees,” adds Mastrogiovanni.

The white paper quantifies the retirement health care costs saving gap between what has been saved using an IRR and what will be needed to cover projected health care costs. It shows that a healthy 45-year-old male earning $50,000 and planning to retire at age 65 using an 80% IRR will face a shortfall of $127,299 in retirement health care costs.

This individual would be able to close this gap with additional annual contributions of $3,460 a year, or with a 50% company 401(k) match, an additional $90 per two week pay period. For a 55-year-old, eliminating the savings gap requires a $25,679 lump-sum investment or an annual additional contribution of $3,291 or $84 a pay period.

“Modest additional contributions to 401(k) plans, HSAs, Roths, annuities, or other products such as life insurance can help close this gap to reduce, or possibly even eliminate, the impact of unexpected health care costs in retirement,” says Mastrogiovanni.

The paper is available here