Amid growing protests from opponents of health care reform, the majority of middle-class Americans are expressing concern about paying for medical costs during retirement – and dramatically underestimating the financial burden they’ll be expected to bear.
The July survey of the First Command Financial Behaviors Index™ reveals that 72 percent of Americans are at least somewhat concerned about health care costs in retirement, with those closest to retirement expressing the most concern. Respondents predict that they will need about $33,000 above traditional retirement savings to cover health care costs during retirement. While significant, this estimate is only a fraction of the $166,000 in out-of-pocket expenses estimated for someone retiring today and living to age 100.
“As difficult as it is to say, Americans have every reason to be concerned about health care costs in retirement,” said Scott Spiker, CEO of First Command Financial Services, Inc. “As government programs — including Social Security and Medicare — become increasingly stretched to keep up with the growing population, retired Americans should be prepared to bear more of the financial burden. That's why it's important to take health care expenses into account now as you plan for your retirement.”
While Medicare covers many medical costs for retirees, it does not cover all financial needs. Current premiums for Medicare Part B, the average for Medicare Part D and the maximum out-of-pocket drug costs before Medicare Part D begins paying 95 percent of drug costs total $5,842 per year. Assuming a five percent return on savings and an average premium increase of 3.7 percent (the Part B increase rate through 2016), an individual retiring at age 65 today and living to age 100 would need an estimated $166,000 to meet these expenses. For a couple, the figure doubles to $332,000.