Nearly two-thirds of baby boomers are not confident they will be able to cover medical expenses in retirement.
According to "Health Care Expenses and Retirement Income: How Escalating Costs Impact Retirement Savings," a report by the Insured Retirement Institute, 63 percent of Baby Boomers do not believe they will be able to cover health care costs in retirement. The concern is especially strong among younger Baby Boomers between the ages of 52 and 54, with 72 percent saying they lack confidence.
The report found that a healthy 65-year-old male can expect a totalcost of health care expenses, including premiums, for the rest of his lifetime to top $350,000, and a 65-year-old woman can expect at least $417,000 in health care expenses-a 13 percent increase compared to her male counterpart. It also found that the average person on Medicare will have out-of-pocket medical expenses totaling more than $4,300 per year.
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"Health care costs are one of the biggest concerns for Boomers as they enter retirement and is also one of the largest threats to Americans' overall retirement income security," said IRI President and CEO Cathy Weatherford. "This report underscores the importance for Americans to properly plan for retirement and to consult with an advisor to ensure they will have enough money to cover health care costs and other necessary expenses in retirement. It also demonstrates the unique role insured retirement strategies can play in a holistic retirement plan and can help alleviate some of the financial burdens of covering health care costs."
The report also found that:
- The 2012 Social Security cost-of-living adjustment (COLA) of 3.6 percent represents an increase, on average, of $42 per month, or about $500 for the year.
- Per capita health care expenses increased by 5.75 percent in the twelve-month period ending September 2011.
- For 2012, Medicare Part B premiums will account for 8.2 percent of the average Social Security benefit, up from 5.1 percent in 2000.
- While the average Social Security check is 31 percent higher than it was in 2001, premiums for Medicare Part B have doubled.
- Although there is no decline in the COLA net of Part B premiums (net COLA) for 2012, Part B premiums have negatively impacted the COLA for 12 of the past 20 years.
- A 55-year-old man can reduce the total investment needed to fund future health expenses by more than 70 percent by adding an annuity.
The Insured Retirement Institute is a not-for-profit organization that educates the public about insured retirement strategies.
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