According to a new report by the Employee Benefit Research Institute (EBRI), retiree health care savings targets declined 6% and 11% from 2012 estimates for a person or couple aged 65. For a married couple—both with drug expenses at the 90th percentile throughout retirement—who wanted a 90% chance of having enough money saved for health care expenses in retirement by age 65, targeted savings fell from $387,000 in 2012 to $360,000 this year.
Because women have longer life expectancies than men, they generally need more savings than men to cover health insurance premiums and health care expenses in retirement post-65. EBRI found that, in 2013, a man would need $65,000 in savings and a woman would need $86,000 if each had a goal of having a 50% chance of having enough money saved to cover health care expenses in retirement. To achieve a 90% chance, $122,000 would be needed for a man and $139,000 for a woman.
Paul Fronstin, director of EBRI’s Health Research and Education program and co-author of the report, noted there are several reasons for the decline in needed savings—chiefly, that projections for future premium and health care cost increases have slowed substantially, as reported by the Congressional Budget Office and Centers for Medicare & Medicaid Services. Additionally, there have been slight drops in the projected growth rates of prescription drug coverage under the Medicare Part D program, and, as of 2013, one less year remains until the coverage gap in Part D phases down to 25% co-insurance.
The EBRI report notes that, in 2010, Medicare covered 62% of the cost of health care services for Medicare beneficiaries ages 65 and older, while out-of-pocket spending accounted for 12% and private insurance covered 13%.
More about the analysis, “Amount of Savings Needed for Health Expenses for People Eligible for Medicare: More Rare Good News,” is in the October EBRI Notes, online at www.ebri.org.