A recent analysis from the Employee Benefit Research Institute (EBRI) suggests that healthcare savings needs are declining for retirees.
According to the EBRI, targeted healthcare savings for the average 65 year old decreased this year as compared to 2012 estimates. Specifically, for a married couple who have pharmaceutical expenses at the 90th percentile and want a 90% chance of having enough money to cover their healthcare costs in retirement, targeted savings have dropped from $387,000 in 2012 to $360,000 this year.
The amount needed by individuals differs, however, according to gender. EBRI noted that, due to longer average lifespans, women have to save more money than their male counterparts in order to cover their healthcare expenses. To achieve a 50% chance of having enough money to cover healthcare costs in retirement, women would need $86,000, while men would need $65,000. For 90% certainty, these numbers increase to $139,000 for women and $122,000 for men.
Paul Fronstin, director of EBRI's Health Research and Education program, attributed the decline in savings needs to the slowing of projected increases in premiums and healthcare costs, as well as a decrease in projected growth rates of prescription drug coverage under Medicare Part D.
In the future, however, a greater portion of retirees’ healthcare costs will likely be paid out-of-pocket.
"Individuals can expect to pay a greater share of their costs out-of-pocket in the future because of the combination of the financial condition of the Medicare program and cutbacks to employment-based retiree health programs," said Fronstin.