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Couples with children over 65 should pay anywhere from $182,000 to $361,000 for health care expenses in retirement, according to EBRI

Couples with children over 65 should pay anywhere from $182,000 to $361,000 for health care expenses in retirement, according to EBRI

According to EBRI's just-published statistics, Medicare beneficiaries' saving limits for health premiums, deductibles, and other health expenses in retirement increased by 3 to 8% in 2021.

According to the authors, savings are required to pay for premiums for Medicare Parts B and D, the Part B deductible, premiums for Medigap Plan G, and out-of-pocket spending for outpatient prescription drugs.

According to a release, the results of EBRIs analysis come from a variety of sources. EBRI uses a Monte Carlo simulation model for this evaluation that simulated 100,000 observations, allowing for the uncertainty about individual mortality and income ratios in retirement.

The analysis shows that:

  • In 2021, a 65-year-old man needed $79,000 in savings and a 65-year-old woman needed $103,000 in savings for a 50% chance of having enough to cover premiums and median prescription drug expenses in retirement. For a 90% chance of having enough savings, the man needs $142,000 and the woman needs $159,000. This is up 9% from 2020.
  • For a 50% chance of having enough to cover health care expenses in retirement, a couple with median prescription drug expenses needed $182,000 in savings. For a 90% chance of having enough, the couple needed $296,000 in savings. This is up 10% from 2020.
  • At the extreme a couple with drug expenses at the 90th percentile throughout retirement who wants a 90% chance of having enough money for health care expenses in retirement by age 65 targeted savings were $361,000 in 2021. This is higher than the $325,000 required in 2020.
  • The increases identified in this paper are due to a number of reasons. The Medicare Trustees increasing projected costs for Medicare Part D out-of-pocket expenses is one reason for the increase. Another reason is the substantial increase in the Medicare Part B premium.

What are your thoughts on EBRI's research?

According to Jae Oh, author of Maximize Your Medicare, the research suggests that the Medicare beneficiary will use a Plan G Medigap policy throughout retirement.

"Not overnight, but in small doses, yes, he said."

As we progress, and as we continue.

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