Savings Medicare Beneficiaries Need for Health Expenses: Some Couples Could Need as Much as $370,000, Up from $350,000 in 2016

Summary

Executive Summary

This EBRI Notes article examines the amount of savings Medicare beneficiaries are projected to need to cover program premiums, deductibles, and certain other health expenses in retirement. More specifically, for the purposes of this study, the health expenses for which savings are accumulated are premiums for Medicare Parts B and D, premiums for Medigap Plan F, and out-of-pocket spending for outpatient prescription drugs.

Data come from a variety of sources and are used in a Monte Carlo simulation model that simulated 100,000 observations, allowing for the uncertainty related to individual mortality and rates of return on assets in retirement.

Here are the key findings:

• In 2017, a 65-year-old man needs $73,000 in savings and a 65-year-old woman needs $95,000 if each have a goal of having a 50 percent chance of having enough savings to cover premiums and median prescription drug expenses in retirement. If they want a 90 percent chance of having enough savings, the man needs $131,000 and the woman needs $147,000. 
• A couple with median prescription drug expenses needs $169,000 if they have a goal of having a 50 percent chance of having enough savings to cover health care expenses in retirement. If the couple wants a 90 percent chance of having enough savings, they need $273,000.
• For a couple with drug expenses at the 90th percentile throughout retirement who want a 90 percent chance of having enough money saved for health care expenses in retirement by age 65, targeted savings is $368,000 in 2017.
• From 2016 to 2017, projected savings targets increased between 1 percent and 6 percent. In contrast, savings targets declined between 2011 and 2014, but then increased from 2014 to 2016 as well. Despite the increase in savings targets since 2014, the 2017 savings targets continue to be lower than they were in 2012 almost across the board.