HEALTH COSTS LOOM LARGE FOR RETIREES
February 20, 2008
Many baby boomers are not going to be able to maintain their standard of living in retirement, not only because they're not saving enough but also because they face skyrocketing health care costs, according to a new study by the Center for Retirement Research at Boston College.
- The government currently estimates an individual's costs for Medicare premiums, co-payments and other cost-sharing at about $3,800 a year for a single person and $7,600 for a couple.
- Also needed is around $500 per person for dental care, eye glasses, hearing aids and other items not covered by Medicare.
- To cover such costs in the decades most baby boomers and Generation Xers will live after quitting their jobs, an individual needs to go into retirement with some $102,000 earmarked just for health care coverage, the center estimated; a couple needs about $206,000.
But most Americans have savings far below the level needed for health and non-health expenses, according to researchers. For instance:
- Currently, the median retirement savings balance for households approaching retirement is just $60,000.
- Before health care costs are factored in, the center estimates that some 44 percent of baby boomers and Gen Xers are "at risk" of being unable to maintain their standard of living in retirement.
- Add in the health care costs, and that rises to 61 percent being at risk for a lower standard of living.
Alicia Munnell, director of the center, said the numbers were "shockingly large." At the same time, she added, there are steps people can take to reduce the odds of an unpleasant retirement. "The most effective step is to plan on working a few years longer," Munnell said. "That cuts the percent at risk by about 10 percentage points."
Source: Eileen Alt Powell, "Health costs loom large for retirees," Kansas City Star, February 19, 2008.
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