Since 2011, the amount of savings Medicare beneficiaries are projected to need to cover program premiums, deductibles, and certain other health expenses in retirement has risen as much as 9 percent, according to EBRI’s estimates. Since 2017, the amount has risen 2–13 percent. This includes the savings needed to pay for premiums for Medicare Parts B and D, premiums for Medigap Plan F, and out-of-pocket spending for outpatient prescription drugs.
The data used in EBRI’s analysis come from a variety of sources. EBRI employed a Monte Carlo simulation model for this evaluation that simulated 100,000 observations, allowing for the uncertainty related to individual mortality and rates of return on assets in retirement.
The analysis reveals:
- In 2018, a 65-year-old man needs $75,000 in savings and a 65-year-old woman needs $99,000 for a 50 percent chance of having enough to cover premiums and median prescription drug expenses in retirement. For a 90 percent chance of having enough savings, the man needs $148,000 and the woman needs $161,000.
- For a 50 percent chance of having enough to cover health care expenses in retirement, a couple with median prescription drug expenses needs $174,000 in savings. For a 90 percent chance of having enough, the couple needs $296,000 in savings.
- At the extreme — a couple with drug expenses at the 90th percentile throughout retirement who want a 90 percent chance of having enough money for health care expenses in retirement by age 65 — targeted savings are $399,000 in 2018.
- From 2011 to 2018, projected savings targets increased as much as 9 percent for some Medicare beneficiaries — savings targets declined between 2011 and 2014, before increasing from 2014 to 2018. Savings targets are up between 2 percent and 13 percent since 2017.
- However, for those with drug expenses at the 90th percentile throughout retirement, savings targets fell 2 percent between 2011 and 2018.