News Reports Will Have You Thinking You’ll Need $469K for Healthcare Costs in Retirement—But You Probably Won’t
Headlines are scaring retirees—but here's the context news reports are leaving out
Key Takeaways
- The $469K figure isn’t universal—it targets retirees with high prescription drug costs
- Plan choice matters: EBRI estimates $405K (Medigap) vs $203K (Advantage).
- The “average cost” varies because healthcare spending changes and comes in waves.
A recent report issued by the Employee Benefit Research Institute (EBRI), a Washington D.C.-based research organization, claimed that some retirees might need to have $469,000 in their savings account to help cover the cost of healthcare. Several news outlets began running stories highlighting the high cost, but, as it turns out, that number only applies to a select few individuals who have high prescription drug costs. Below we share everything you need to know about the report, along with ways to save on healthcare now and in the future.
What to know about the new cost of healthcare report
A few weeks ago, the EBRI released the report, Projected Savings Medicare Beneficiaries Need for Health Expenses in Retirement Up Again in 2025. It shows that even with the Inflation Reduction Act’s $2,100 annual cap on Medicare Part D out-of-pocket prescription drug costs, retirees still need a significant amount of money to help cover other healthcare costs.
EBRI found that retired couples who have high prescription drug costs may need around $469,000 saved to help cover whatever healthcare charges come their way.
The good news? Healthcare costs for retirees enrolled in Medicare Part D won’t be nearly as high, thanks in part to that $2,100 annual cap, which was created in 2022 and keeps retirees from overspending on prescription drugs.
“Healthcare costs remain a major financial challenge in retirement, even for people covered by Medicare,” Paul Fronstin, director of health benefits research at EBRI, said in a statement. “While the new Medicare Part D out-of-pocket cap offers important financial protection, our analysis shows many retirees will still need significant savings to have a reasonable chance of covering healthcare expenses throughout retirement.”
The report also revealed that couples enrolled in a Medigap plan with an average premium would need $405,000 in savings to help cover 90 percent of their healthcare expenses. But couples enrolled in a Medicare Advantage plan with normal prescription drug expenses and healthcare services will have lower out-of-pocket costs and would need about half that amount, or $203,000, to have a 90 percent chance of covering the cost of healthcare, according to the report.
What’s more, the EBRI report finds that single female retirees enrolled in a Medigap plan will need $252,000 to have a 90 percent chance of having their healthcare costs covered, which is substantially higher than single male retirees enrolled in that exact same plan, who would need $212,000, according to the EBRI.
These numbers do apply to more retirees, since most Medigap plans do not cover prescription drugs, unless the beneficiary enrollees in a Medicare Part D plan. This can result in higher costs and create some confusion over what’s covered and what’s not.
“Retirees and workers nearing retirement should not assume Medicare will fully shield them from potentially high healthcare costs,” Jake Spiegel, senior research associate at EBRI, said in a statement. “These findings highlight the importance of planning ahead and understanding the trade-offs among coverage options, including differences in premiums, out-of-pocket costs and access to care.”
Other organizations report lower estimates when it comes to the average cost of healthcare in retirement. Fidelity Investments, for example, says retirees can expect to spend an average of $172,500 on healthcare and medical experiences throughout their retirement.
Of course, the ever-changing average cost of healthcare in America makes it difficult to know what we’ll spend. “Healthcare spending isn’t consistent; it comes in waves,” Jim Shagawat, a certified financial planner in New Jersey, told CNBC. “[But] the goal isn’t to predict exact expenses. It’s more to make sure healthcare costs don’t disrupt the overall retirement plan.”
How to save on healthcare costs
When it comes to saving on healthcare, all experts agree that the one thing retirees need to do is research to find the plan that works the best for them.
“Choosing the right health coverage is essential to saving money and retaining access to quality care. When comparing Medicare coverage options, people should factor in prescriptions, preferred doctors and any chronic conditions they may need ongoing care for—smart choices that can potentially lead to over $1,800 in savings per year,” Whitney Stidom, vice president of consumer enablement at eHealth, an online health insurance marketplace says. “Medical and financial needs can change over time, and the prescription drugs covered by Medicare plans can also change. Some online marketplaces enable people to provide a list of medications and preferred healthcare providers, and then get recommended plans based on those needs.”
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