Aggressive Saving Needed to Meet Retirement Health Care Costs

Health care costs could take a bite out of anyone’s retirement income, but assuming average longevity for women and men, women need to plan for much higher retirement health care expenses than men, according to a report from HealthView Services, a provider of retirement health care cost data and planning tools to the retirement industry.

The average expected future retirement health care premiums for Medicare B, D and supplemental insurance for a healthy woman retiring this year at 65-years-of-age and living to 89 are projected to be $235,526 ($153,079 in today’s dollars), significantly more than the $199,946 ($135,321) for men, who are expected to live to 87, the company’s projections found. Adding in all out-of-pocket costs, hearing, vision and dental, women’s total lifetime health care costs rise to $314,673 ($205,468), compared to $267,395 ($181,625) for men. These numbers assume Modified Adjusted Gross Income (MAGI) in retirement will not trigger Medicare Surcharges (Less than $85,000 or $170,000 for a couple).  

Among the unique challenges facing women are lower lifetime earnings resulting from gender pay disparities and time out of the workforce to take care of family members. These two variables inevitably impact retirement savings and Social Security income. 

According to “The High Cost of Living Longer: Women & Retirement Health Care,” on average, husbands live two years fewer and are 2.3 years older than their wives. This suggests women will spend approximately four years at the end of life on their own. 

For a healthy 55-year-old-woman living to 89, total health care costs between 85 and 89 are projected to be $146,471 ($75,200 present value), excluding long-term care. For women who will live longer, the costs will be even higher.

Meeting long-term care needs will be an additional challenge. The report uses a blended approach that reflects the probability of care to calculate reasonable savings to cover this potential expense. For a 55-year-old woman retiring at 66, the savings recommended to plan for end-of-life care are estimated to be $372,631 ($194,215 present value).  

The paper explores savings required to meet end of life needs. It shows that a 55-year-old woman can allocate $25,500 growing at 6% annually to cover her projected $146,471 total health care costs in the final four years of life. Alternatively, she could address $72,932 in basic Medicare premiums (Parts B and D) by investing $12,700 today at an estimated 6% annual return or increase 401(k), or health savings account (HAS) contributions by approximately $25.00 per pay period (assuming 26 pay periods) based on an employer match.

"While the challenges facing women should not be underestimated, with careful planning and preparation, financial security in retirement is an achievable goal for many," says Ron Mastrogiovanni, founder and CEO of HealthView Services. "It is our intention for the data in this report to serve as a starting point for discussions leading to plans that reflect the future needs of women in retirement."