EBRI Says Retirees Need to Save More for Healthcare

The increased savings required to cover rising healthcare costs hasn’t been this big in a decade.

The amount a 65-year-old should have saved for healthcare costs jumped 3% to 8% in 2021, says a new study from the Employee Benefits Research Institute.

The EBRI concluded those with the biggest needs will need to have saved even more. For example, a couple who reached 65 years old in 2021 and needs the highest level of drug expenses in retirement should have accumulated a total of $361,000 for health costs. That compares to $325,000 for couples reaching 65 in 2020.

“Several reasons drive seniors’ need for more savings to cover healthcare expenses,” said Paul Fronstin, director of EBRI’s Health Research and Education Program, and co-author of the report, in a press release. “The Medicare Trustees increasing projected costs for Medicare Part D out-of-pocket expenses is one cause for the growth in costs. At the same time, there was a substantial increase in the Medicare Part B premium.”

The report notes Medicare Trustees increased projected out-of-pocket expenses for drugs, covered by Medicare Part D, though premiums were projected to be lower. The trustees raised their projection for the Part D deductible to $670 in 2029, up from $645, a 4% increase, the EBRI report said.

It also noted that on November 12, 2021, the Centers for Medicare and Medicaid Services announced that the Medicare Part B premium would increase from $148.50 in 2021 to $170.10 in 2022. That 15% increase is responsible for 25% to 50% of the increase in EBRI’s savings targets.

The report noted EBRI’s analysis does not include long-term-care and other health expenses not covered by Medicare. It also does not consider the fact that many individuals retire before becoming eligible for Medicare. But it does acknowledge that some workers will need to save less if they work past age 65 and postpone enrollment in Medicare Parts B and D because they receive health benefits as active workers.

Also, the study assumes that individuals are participating in original Medicare, not cheaper all-inclusive Medicare Advantage plans, offered by private insurers with usually far more limited networks of doctors. The study assumes the health expenses for which savings would be accumulated are premiums for Medicare Parts B and D, the Part B deductible, premiums for Medigap Plan G, and out-of-pocket spending for outpatient prescription drugs.

According to the Kaiser Family Foundation (KFF),  “In 2021, more than four in 10 (42%) Medicare beneficiaries – 26.4 million people out of 62.7 million Medicare beneficiaries overall – are enrolled in Medicare Advantage plans; this share has steadily increased over time since the early 2000s.”

It’s likely Medicare Advantage plans will become an even larger presence in Medicare, KFF says, especially since the Medicare Hospital Insurance Trust Fund is currently projected to be insolvent by 2026.



Latest news

Routine Kidney Screening Considered

Kidney experts estimates that 37 million people in the United States have kidney disease, but around 90% do not know they have it.

Bitcoin Pizza? Liquidity Lounge?

Crypto executives are at the Davos gathering seeking to encourage faster adoption of the technology, despite the crypto crash earlier in May.

FSI Continues to Challenge DOL on Independent Contractor Rule

The trade group pledges to defend advisors’ independent contractor status as DOL appeals judge’s decision that rule must stick.

Venture Capitalist Gives Stanford $1.1 Billion for Climate Change School

Stanford University is getting $1.1 billion, its largest gift ever, for a new climate change school.

New Medicare Enrollees May Get Faster Coverage

A proposed rule would eliminate delays faced by people who enroll in months after their 65th birthday.

U.S. Life-Expectancy Drop Exceeds Other High-Income Countries

But it's not just Covid causing a growing gap in life expectancy between the U.S. and other countries.