Medical Expenses in Retirement

Too many people continue to believe that Medicare will cover all or most of their retirement medical expenses. While Medicare does cover a lot, it isn’t close to covering all your expenses. On average it covers about half of medical expenses. That means for a large number of people it covers much less.

The Employee Benefits Research Institute issued its latest estimate of medical spending in retirement, the out-of-pocket expenses that aren’t covered by Medicare. Women in general need to save more than men, because women live longer and are likely to incur higher lifetime medical expenses. The amount a person should have saved by age 65 depends on the probability they want of being able to pay all their lifetime expenses, investment rate of return and other factors. The total cost and uncertainty can be mitigated by purchasing a Part D Prescription Drug Insurance plan and taking other steps.

In 2013, a man would need $65,000 in savings and a woman would need $86,000 if each had a goal of having a 50 percent chance of having enough money saved to cover health care expenses in retirement. If either instead wanted a 90 percent chance of having enough savings, $122,000 would be needed for a man and $139,000 would be needed for a woman.