The Employee Benefit Research Institute increased its projections for how much retirees will need to save to pay for health care in retirement. In an EBRI Notes article released in late January, the organization found that a 65-year-old couple may need nearly $350,000 to have a 90% chance of covering their health care expenses in retirement.
Prescription costs are the key factor in determining how much a person needs to save for retirement health care. A 65-year-old man paying median prescription drug costs needs $127,000 to meet that 90% target, EBRI found, while a 65-year-old woman needs $143,000. A married couple needs $265,000. Those targets are each up 2% from last year.
If drug costs go up to the 75th percentile, a 65-year-old man would need $139,000 and a woman would need $156,000. A married couple should have $289,000 saved, according to EBRI. Those targets are up less than 1%, with no change in the savings target for women.
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In the 90th percentile for prescription drug costs, savings targets increase to $168,000 for men, $187,000 for women and $349,000 for couples.
Couples that are willing to gamble on a 50% chance of running out of savings have a target range of between $165,000 and $221,000, depending on their prescription costs. Men need to save between $72,000 and $97,000 for a 50% chance of success; women need to save between $93,000 and $124,000.
EBRI also pointed out that a specific savings goal for health care in retirement is a moving target. It depends on when someone retires; how long he or she will live after that, and how healthy he or she is; the availability and source of supplemental coverage; the increase in the cost of health care; and interest rates and returns on other investments.