Data and Research

Near Retirees Can Expect $400K in Health Care Costs

A new report suggests health care costs will consume a rising percentage of Social Security benefits for future retirees.

By Rebecca Moore | March 25, 2015
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Average expected retirement health care costs for Medicare B, D and Supplemental insurance for a healthy couple retiring this year at age 65 will be $266,589 in today’s dollars, according to HealthView Services' “2015 Retirement Health Care Cost Data Report.”

For a couple retiring in 10 years at 65, expected costs will rise to $320,996. However, retirement health care costs are even higher when expected dental, vision, hearing, co-pays and all other out-of-pocket costs are included. With these additional components, total projected retirement health care costs rise to $394,954 for a couple retiring this year at age 65. For a 55-year-old couple retiring in 10 years, total lifetime health care costs are expected to be $463,849.

The 2015 report reveals an increase in total year-over-year projected lifetime retirement health care costs of approximately 6.5%, not including the cost of long-term care services. “The report demonstrates that health care costs will account for a very significant and growing portion of retirees’ budgets,” says Ron Mastrogiovanni, founder and CEO of HealthView Services. “The data also shows that Medicare-related costs are only part of the story. Retirees need to plan for health-related expenses not covered by Medicare, and the potential impact of income-based Medicare surcharges.”

With Social Security being the most significant source of retirement income for many, the report shows health care will account for a rising percentage of Social Security benefits. Drawing upon year-end 2014 data, for the average 66-year-old couple retiring this year, who are eligible for full Social Security Benefits, HealthView Services’ Retirement Health Care Cost Index reveals total health care costs will consume 67% of their lifetime Social Security benefits. For a couple retiring in 10 years at 65, approximately 90% of their lifetime Social Security benefits will be required for health care expenses. The index is calculated based on average Social Security benefits of $25,332 in 2014, and assumes annual 2% cost of living adjustments (COLA). The data also assumes that a couple optimizes Social Security payments by only starting to draw benefits at their full retirement age.