Can You Afford Health Care In Retirement? You'll Need At Least $86,000 In Savings, More For Women

The 2024 Milliman Retiree Health Cost Index projects that health care expenses for retirees will continue to rise, with costs varying based on health status, location, and age at retirement, which must all be considered when planning for retirement.

For a healthy 65-year-old retiring in 2024 with a Medicare Advantage Part D (MAPD) plan, lifetime health care costs are estimated at $128,000 for men and $147,000 for women. To cover these expenses, men need at least $86,000 in savings, while women require $96,000, assuming a 3% annual investment return.

Costs are even higher for those choosing Original Medicare with Medigap plus Part D, with projected lifetime expenses of $281,000 for men and $320,000 for women. The difference in costs between genders is primarily due to women’s longer average lifespan.

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Location significantly impacts costs. For example, a 65-year-old retiring in Florida in 2024 might spend $340,000 on health care, compared to $260,000-$280,000 in Texas.

Recent changes, including the Inflation Reduction Act’s modifications to Medicare Part D and increased spending on brand-name drugs like GLP-1s, have affected health care costs. While out-of-pocket expenses decreased in some areas, premiums have risen.

Retirement timing greatly influences health care expenses. Retiring at 60 instead of 65 can increase costs by 56% to 86%, depending on the chosen plan. Conversely, delaying retirement to age 70 can reduce health care expenses by about 30%.

Robert Schmidt, Milliman principal and co-author of the index, emphasizes the importance of considering health care expenses in retirement planning. He advises realistic assessment of health status and health care expenses to ensure a less stressful, financially healthier retirement.

The study highlights the complex factors affecting retiree health care costs and underscores the need for careful financial planning. As health care remains a significant expense in retirement, understanding these projections can help individuals and their financial advisors better prepare for their future financial needs.

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