Despite health reform, retirees will need hundreds of thousands of dollars in savings to cover medical expenses when they retire, according to a report by the Employee Benefit Research Institute (EBRI). Uncertainty related to healthcare use, prescription drug use, and longevity may push those costs even higher.
Men aged 65 retiring this year will need between $124,000 and $211,000 if they want a 90 percent chance of covering health insurance premiums and out-of-pocket expenses. Women that age will need between $143,000 and $242,000 to have enough money because they tend to live longer, according to EBRI. Anyone retiring before age 65 will need even more, notes the Washington DC-based nonprofit research institute.
"Because employers are continuing to scale back retiree health benefits, and policymakers may soon begin to address Medicare's funding shortfall, more of the financial costs of healthcare will be shifted to Medicare beneficiaries in the future," said Paul Fronstin, director of EBRI's Health Research and Education Program and co-author of the report.
The future is just as grim. Men retiring in 2020 will need between $111,000 and $354,000 in savings, while women will need anywhere from $147,000 to $406,000 (in 2020 dollars), according to the report.
"Many workers are generally unprepared for both healthcare expenses in retirement and retirement expenses," said EBRI CEO and co-author Dallas Salisbury. In fact, many retirees will need more money than the amounts cited, since the report doesn't factor in long-term care expenses or the fact that many people retire prior to Medicare eligibility, he added.
But the study also shows that individuals can reduce their retirement healthcare costs 40 percent or more by avoiding expensive prescription drugs, notes CBS Money Watch.