For a typical married couple at age 65, uninsured health care costs through the remainder of life will amount to around $189,000 – the accumulation of insurance premiums, out-of-pocket costs and home health care based on a present value calculation. And that's the good news.
The bad news? A typical household faces a 5% chance that uninsured health care costs will exceed $295,000, and if nursing-home costs are included, as much as $516,000, according to a recent research analysis published by the Center for Retirement Research at Boston College (CRR).
That's well more than most couples can afford. Even at the peak of the stock market in 2007, the analysis points out, less than 15% of U.S. households had total financial resources of that amount, let alone money available for medical expenses.
Recommended For You
Lifetime cost analysis
An appreciation of the difference between average health care costs and the risk of incurring substantially higher costs is essential to sound planning. It's also at the heart of How Much Is Enough? The Distribution of Lifetime Health Care Costs. The 2010 CRR research project, funded by Prudential, examines the distribution of lifetime health care costs to help quantify the risk of experiencing exceptionally large expenses.
Analyzing data on lifetime health care costs, authors Anthony Webb (associate director for research at CRR) and Natalia Zhivan (a CRR consultant) found the main risk involved in assessing potential costs is nursing home care. That's not surprising, they point out, considering that few individuals have insurance for nursing home costs, while most over 65 have general health care insurance under Medicare.
Including nursing care, the average amount a 65-year-old couple can expect to spend on health care rises to $243,000 from $189,000, with a 5% probability that costs will exceed $500,000. "Incorporating (nursing care) costs, households face a significant risk that could threaten their retirement security," the authors wrote.
"When deciding how much to save for retirement, and how rapidly to draw down their wealth during retirement, households need to consider what risk they are prepared to accept of having their assets substantially depleted by health care costs, whether they are above or below the average risk of incurring exceptionally high costs, and whether they should insure against health care costs by purchasing long-term care insurance," the authors wrote.
For more detail: A full copy of the report, How Much Is Enough: The Distribution of Lifetime Health Care Costs, is available here.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
