Everyone knows that health care costs in the U.S. are rising. An index introduced Thursday puts that rise into grim perspective.
HealthView Services’ new Retirement Health Care Cost Index shows that middle-class Americans are approaching the day when they will have to use their entire Social Security benefit to pay for their health care.
The index may serve as a useful tool for financial planners working with clients who are approaching retirement.
It measures the percentage of Social Security benefits required to pay for health care-related costs in retirement for a healthy couple receiving the average expected Social Security benefit at full retirement age.
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Total retirement health care costs measured by the index include all Medicare premiums, including Parts B and D, Medigap premiums, as well as co-pays not covered by Medicare.
Those costs will increase from 69% of Social Security benefits for a couple retiring in one year to 98% of benefits for a healthy couple retiring in 10 years.
Couples retiring in 20 years will need 127% of their Social Security benefits to cover health care costs, and those retiring in 32 years will need 190%.
Translated into today’s dollars, that means an average healthy couple retiring in 2015 will face healthcare costs of approximately $366,599, according HealthView Services data.
In another 10 years, those costs will rise to approximately $421,083 in today’s dollars, reflecting estimated health care cost inflation and Social Security cost-of-living adjustments.
As a result, HealthView Services said in a statement, many Americans will have to earmark their Social Security benefits to pay for health care, and rely on other assets and sources of income to pay for living expenses in retirement, such as housing, transportation, travel, taxes and food.
“The index reveals an ugly truth that will come as a shock to many,” Ron Mastrogiovanni, founder and chief executive of HealthView Services, said in the statement.
“Many Americans believe that Medicare will cover most or all of their health care costs in retirement. This is simply untrue.”