Retirees may need hundreds of thousands of dollars more than they plan for to cover health-care costs in retirement, data from the Employee Benefit Research Institute finds.
That’s after accounting for Medicare, the U.S.’s federal health insurance program for people 65 and older. Medicare covers many services, though retirees often underestimate how much they’ll still pay out of pocket over time, experts say.
A 65-year-old couple may need about $405,000 to cover health-care expenses in retirement, based on a scenario that assumes a 90% chance of covering those costs and reflects common Medicare coverage choices, according to a March analysis from EBRI.
The estimate reflects how much retirees may need to have saved to cover premiums, out-of-pocket costs and prescription drug spending over the course of retirement, costs that tend to rise as people age and need more care. In scenarios where prescription drug costs are especially high, that total can rise to $469,000, EBRI finds.
When it comes to unexpected costs, “what most people don’t understand is that out-of-pocket costs can be significant once they get sick, which is usually later in retirement,” says Carolyn McClanahan, a physician and certified financial planner in Jacksonville, Florida. “No one thinks about it until it hits them in the pocketbook.”
