Retirement Savings Could Fall Short As Medicare Health Costs Reach $383,000 Per Couple

Senior female customer standing at chemist counter as pharmacist hands her medication order.
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Even if you’ve been following recommended retirement savings plans to have enough money to retire comfortably, your savings could fall short if you need a lot of medications in the future.

A study from the Employee Benefit Research Institute found that couples could need as much as $383,000 saved, earning 7.32% with investment returns yearly, to have a 90% chance of covering their healthcare costs in retirement.

Previous iterations of the simulation by EBRI did not account for changes to Medicare Part D.

The new model found that a 65-year-old man with a Medigap plan will need $96,000 in retirement savings to have a 50% chance of covering premiums plus prescription drug costs. A woman in the same situation would need $116,000.

For a 90% chance of meeting healthcare costs, a man would need $166,000 and a woman would need $197,000. Couples enrolled in Medigap would need a combined $212,000 to have a 50% chance of covering their healthcare expenses and $318,000 to have a 90% chance. But that number could be as high as $383,000, according to EBRI research, if the couple has exceptionally high prescription drug costs.

Savings Through Medicare Advantage

You may be able to reduce your costs by choosing a different plan. Couples in Medicare Advantage plans may only need $184,000 to secure a 90% chance of covering their healthcare costs.

Similarly, a man with median drug costs using Medicare Advantage will need $96,000 to have a 90% chance of covering his healthcare needs, and $56,000 for a 50% chance. Women in a similar situation would need $113,000 for a 90% chance and $67,000 for a 50% chance.

Are You Retirement Ready?

However, Medicare Advantage plans may have limited networks or more hoops to jump through to be approved for certain medications or services.

The Decisions You Make Today Can Affect Your Healthcare Costs Tomorrow

Your overall health and lifestyle choices today may affect your future drug costs. For instance, if you are overweight, you can reduce your risk of diabetes by nearly 60% by shedding just 7% of your body fat, according to the Mayo Clinic.

Regular exercise can reduce the risk of diabetes, heart disease and other illnesses.

A healthy diet that incorporates plant-based foods and healthy fats can also help you achieve and maintain a healthy weight and heart health.

While there is a level of uncertainty and, of course, anyone can get sick at any time, exercising and eating right can help prevent certain diseases as you age.

Bolster Your Retirement Savings

At the same time, you may want to look at your retirement savings and see if you will achieve these savings goals on your current trajectory. If not, speak to the benefits advisor at your workplace or a financial planner to see how you may be able to save more.

If you are nearing retirement age, review your Medicare options carefully so that you are prepared to make the right enrollment decision when the time comes.

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