NU Online News Service, Feb. 24, 3:53 p.m. – Some retirees might need to be millionaires to prefund medical costs, according to researchers at the Employee Benefit Research Institute, Washington.

The EBRI came to that conclusion by considering the case of a 65-year-old retiree without employment-based health benefits. If the retiree lives to age 100 and medical inflation averages 14% per year, the retiree will need about $1.5 million to prefund lifetime out-of-pocket medical expenses, the EBRI researchers estimate.

If the same retiree has employment-based insurance that covers prescription drug costs, the prefunding level might be about $500,000, but only 27% of U.S. residents over age 65 have employment-based benefits, EBRI says.

The estimates do not include the cost of long-term care, EBRI notes.

But EBRI also points out that prefunding needs might be much lower if medical inflation rates turn out to be lower than feared. A man who retired at 65 and died at 80 in a world where medical inflation averaged only 7% would need only $47,000 to prefund lifetime medical expenses with employment-based insurance and $116,000 to prefund lifetime medical expenses without employer-based benefits.