Medicare Recipients Face Significantly Higher Projected Costs: EBRI

What You Need to Know

The amount of money that a Medicare beneficiary needs to cover health care costs in retirement rose again, according to a study.
Couples enrolled in a Medigap plan with average premiums will need to have saved $212,000 to have a 50% chance of covering their medical expenditures in retirement.
While there is significant individual-level variation, enrollees in Medicare Advantage plans generally have lower savings targets.

An annual estimate of how much money a 65-year-old Medicare beneficiary should have in savings to cover health care costs in retirement jumped yet again in 2022, according to the Employee Benefit Research Institute.

The predicted health savings targets shot up by about $17,000 for a 65-year-old man enrolled in a Medigap plan with average premiums and median prescription drug costs, assuming the goal is to have a 50% chance of holding enough liquid assets to cover all out-of-pocket care expenditures.

According to EBRI, this individual will need to have saved $96,000 to achieve this outcome, while the average woman will need to have saved $116,000, which is up from $103,000 over the prior year’s estimate.

To have a 90% chance of meeting their health care spending needs in retirement, a man will need to have saved $166,000, and a woman will need to have saved $197,000, EBRI’s data suggests. Meanwhile, couples enrolled in a Medigap plan with average premiums will need to have saved $212,000 to have a 50% chance of covering their collective medical expenditures in retirement and $318,000 to have a 90% chance.

Representing an extreme case, a couple with particularly high prescription drug expenditures will need to have saved $383,000 to have a 90% chance of having enough money to cover their health care costs in retirement. This figure is up dramatically from the 2021 estimate of $361,000 and the 2020 estimate of $325,000.