The combination of Medicare and Social Security won't be enough to cover the medical costs of most middle-class retirees within a decade.
Projections of average health costs and average Social Security income streams created by HealthView Services "shows that middle-class Americans' retirement health care costs are on a path to exceed their Social Security benefit," the firm said in a release.
The company's Retirement Health Care Cost Index "measures the percentage of Social Security benefits required to pay for health care-related costs in retirement for a healthy couple receiving the average expected Social Security benefit at full retirement age," HealthView said.
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What those projections show may be of concern to future retirees. For example:
- Retirement health care costs will increase from 69 percent of Social Security benefits for a couple retiring in one year to 98 percent of Social Security benefits for a healthy couple retiring in 10 years.
- For couples retiring in 20 years, 127 percent of Social Security benefits will be required to cover health care costs.
- For couples retiring in 32 years, they will need 190 percent of their Social Security benefits to cover health care costs.
The projections are based on life expectancies of couples and on average health costs based upon today's cost of care. For those couples retiring next year, the index estimates a health care bill of $366,599. That number is projected to rise to $421,083 over the next decade.
The index "shows that many Americans will have to earmark their Social Security benefits to pay for health care and rely on other assets and sources of income to pay for living expenses in retirement such as housing, transportation, travel, taxes and food," HealthView said.
Wealthier couples will do better, with a smaller portion of the Social Security dollars going to pay for health costs.
"The Index shows how the gap between health care cost inflation of 5-7 percent, based on current HealthView data, and the 2 percent expected cost of living increases in Social Security will drive the increasing portion of Social Security required for future retirees' health care costs," HealthView said. "It also underscores the range of factors that need to be considered when planning for retirement, including: age, gender, marital status, health, where you live, number of years to retirement, and when Social Security recipients elect to receive their benefits."
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
