Even on a $0 Medicare plan, your clients need to save for healthcare in retirement

Let’s be honest. Most of us work for one reason: to retire. But to cross that finish line comfortably, we must make sure our finances are squared away. One cost that certainly lives in our minds but could be underestimated easily is health care costs.

The Employee Benefit Research Institute (EBRI) aims to help soon-to-be beneficiaries know how much they need to save to afford their healthcare costs. EBRI has taken some recent changes to aspects of Medicare, Part D and Medicare Advantage into account and constructed some figures to achieve that goal. While each individual’s experience can vary greatly because of plan type, location, and personal health, EBRI grouped its results into a few different situations.

65 years old, Medigap enrolled

In this scenario, a man will need $96,000 saved if he would like a 50% chance to cover his average premiums, cost-sharing and the average amount spent on prescription drugs. A woman in the same scenario will need to save $116,000.

If he doesn’t like those odds, he can save $166,000 to get a 90% chance of covering those same needs. Similarly, a woman will need $197,000.

For a couple, that number is $318,000.

If a couple needs more costly drugs, they will need to save more. In order to have a 90% chance of covering their health care costs through retirement, they will need to have $383,000 stashed away.

65 years old, Medicare Advantage enrolled

Do it again, but with Medicare Advantage? Keeping all other variables the same, EBRI predicts the average man needs $56,000 to hit that 50% chance of covering all costs, and $96,000 for 90%. For a woman, that number is $67,000 for 50%, and $113,000 for 90%. Couples need to save $123,000 for 50%, and $184,000 for 90%.

How does it stack up?

Let’s put the data in perspective. According to a 2022 report published by Vanguard, the median savings for a 65-year-old person is $87,700. Clients whose assets are closer to this median will need to carefully weigh their options to ensure healthcare needs are met throughout retirement. Those above the median rate may have more flexibility in how they approach their healthcare.

Since everyone’s situation is different, it’s impossible to make a universal recommendation. Each client’s personal circumstances should guide their final decisions. It can be easier, though, when an educated guess is available for future beneficiaries to base those decisions on. Nothing is set in stone, and these figures will change over time. But one thing is certain to remain the same: our desire to retire in comfort and health.