Projected Savings Needed For Health Care In Retirement Continue To Fall

 

Projected savings the American elderly need to cover their health care costs in retirement continue to decline, due in part to enhanced prescription drug coverage provided by the Patient Protection and Affordable Care Act (ACA), according to recent research from the Employee Benefit Research Institute (EBRI).

EBRI found that savings targets declined between 2 percent and 10 percent between 2013 and 2014. For a married couple both with drug expenses at the 90th percentile throughout retirement who wanted a 90 percent chance of having enough money saved for health care expenses in retirement by age 65, targeted savings fell from $360,000 in 2013 to $326,000 in 2014.

In 2014, a man would need $64,000 in savings and a woman would need $83,000 if each had a goal of having a 50 percent chance of having enough money saved to cover health care expenses in retirement. If either instead wanted a 90 percent chance of having enough savings, $116,000 would be needed for a man and $131,000 would be needed for a woman.

For more information on the report, Amount of Savings Needed for Health Expenses for People Eligible for Medicare: Good News Not So Rare Anymore, visit http://www.ebri.org.

Savings Still Needed

While needed savings for health care in retirement have decreased, individuals will still need a substantial nest egg to pay for health care costs in retirement. According to a recent AARP study, nearly 40 percent of individuals older than 50 are not saving for health care costs, and 44 percent do not have any plans to do so in the near future. Only 28 percent plan to begin saving within the next few years. The most common barrier to saving is the sense that one cannot afford to do so at this time either because they are paying other expenses or taking care of others.

Even for the 62 percent who are saving for health care costs, 55 percent are still worried they will not be able to afford paying for health care in retirement. Younger workers (ages 50to 59) are more worried than older workers (those older than 60). Women (61 percent) are also more worried than men (51 percent). This may be due to the fact that women are more often the health decision-makers and may be more aware of potential costs.

For more information on the AARP study, visit http://www.aarp.org/work/retirement-planning/info-2014/health-care-costs-planning-for-retirement.html.

Visit our News Library to read more news stories.