Using conservative estimates for a healthy 65-year-old couple living to actuarial longevity, total lifetime retirement health care costs will increase by $85,917 if health care inflation is 11.85% for two years (or 1.5 times the current CPI of 7.9%).
For an average 55-year-old couple retiring in 10 years, using the same inflation rate and period, costs will rise by $160,712.
Total lifetime health care expenses for the 65-year-old couple, including Medicare Part B and D premiums, supplemental insurance, actuarially determined out-of-pocket expenses for hospitalization, doctor visits, tests, and prescriptions using the same scenario, are projected to be $683,306.
And, for the 55-year-old couple, $1,094,460 for the exact same coverage.
These totals do not take into account taxes or income-based surcharges.
The totals do not include the cost of meeting long-term care needs.
Health Care Costs vs. Social Security
Consider what those costs look like when compared with projected COLA-adjusted Social Security benefits.
Paying the average 65-year-old couple’s estimate of total lifetime health care costs will require approximately 71% of future average Social Security benefits.
For a 55-year-old couple retiring in 10 years, the percentage of Social Security required to cover health care is 93%.
Knowledge Is Power
Ensuring that clients can address their retirement needs starts with reliable data.
Projected health care expenses depend on individual needs and circumstances.
Variables such as income, time to retirement, gender, location, and health conditions all have a significant impact on actual expenses in retirement.
The bottom line: This current period of high inflation will drive health care costs in retirement significantly higher.
Retirement plans needs to reflect this, while at the same time factoring in other ways inflation will impact the savings and investment strategies required to achieve retirees’ goals.
Ron Mastrogiovanni is founder & CEO of HealthView Services, a provider of retirement health care, long-term care and Social Security planning software and data.