Scary Retirement Study: Health Care Will Eat Up Social Security Benefits

But adding in more variable health expenses such as dental, vision, hearing, co-pays and other out-of-pocket expenses would increase lifetime health-care expenses to $394,954 for a 65-year-old couple retiring today and $463,849 for a couple retiring at age 65 10 years from now.

The financial advisor’s role in all this is crucial, says HealthView Services founder and CEO Ron Mastrogiovanni, in a release announcing the new report.

“These numbers are big, but they are manageable if planned for early enough.… The starting point for managing these costs is sitting down with an advisor to calculate expected health care costs and incorporating them into a comprehensive retirement plan.”

Thus, advisors who want their clients’ Social Security to fund non-health care costs, as it was meant to do, should be encouraging a 55-year-old average couple planning to retire in 10 years to stash a whopping $1,206 a month if the couple’s goal is to have enough to pay for Medicare part D costs and costly supplemental insurance as well.

That number falls to just $429 monthly if the goal is merely to cover Medicare part D.

Advisors to wealthy clients must factor in the steep costs of Medicare surcharges, which kick in for couples whose income exceeds $170,000, and increase premiums anywhere from 35% to 200%.

The report details widely varying components of health care costs, some of them shocking. For example, pre-retiree deductibiles have increased by 50%, to an average of $1,217 annually, since 2009, though the rate of cost-sharing has increased in the 3% annual range for retirees.

In general, the recession has muted health care inflation in recent years, though retiree health care expenses are expected to rise significantly in the coming years. HealthView Services reckons average annual health care expenses for retirees at $11,268 for the balance of the decade—a figure expected to rise (in inflation-adjusted dollars) to over $31,000 annually 20 years hence.

Another material finding is the influence of location on retiree health care. A 65-year-old retiree couple in Maryland, for example, is projected to pay 73% more in supplemental insurance than their counterparts in Hawaii, suggesting perhaps that financially strapped retirees need not entirely abandon their travel dreams if they shop around for attractive yet affordable retirement venues.

— Related on ThinkAdvisor:

• Kotlikoff: Social Security’s Rules Ripping Off Recipients
• Unclaimed Cash: Why Social Security Planning Can’t Be Ignored by Advisors
• America Ranks 19th on New Global Retirement Security Index