Longevity and Retirement: Women Need to Save More than Men


By Stephen Miller December 3, 2010

Even though the 2010 health care reform law is expected to reduce retiree prescription drug costs for many people, retirees will still need a significant amount of savings to cover their out-of-pocket health expenses when they retire, according to a December 2010 report by the not-for-profit Employee Benefit Research Institute (EBRI). Women in particular will need more savings than men because they tend to live longer.

EBRI's analysis finds that:

• Men retiring in 2010 at age 65 will need from $65,000 to $109,000 in savings that is set aside to cover health insurance premiums and out-of-pocket expenses in retirement if they want a 50-50 chance of being able to have enough money. To improve the odds to 90 percent, they’ll need from $124,000 to $211,000.

• Women retiring in 2010 at age 65 will need even more, from $88,000 to $146,000 in dedicated health care savings, if they are comfortable with a 50 percent chance of having enough money, and from $143,000 to $242,000 if they want a 90 percent chance.

• Those currently at age 55 will need even greater savings when they turn 65 in 2020. The needed savings for men retiring in 2020 ranges from $111,000 to $354,000, while the needed savings for women ranges from $147,000 to $406,000 (in 2020 dollars).

“Because employers are continuing to scale back retiree health benefits and policy-makers may soon begin to address Medicare’s funding shortfall, more of the financial costs of health care will be shifted to Medicare beneficiaries in the future,” said Paul Fronstin, director of EBRI’s Health Research and Education Program and a co-author of the report.

Dallas Salisbury, EBRI CEO and a co-author of the report, noted that “many workers are generally unprepared for both health care expenses in retirement and retirement expenses. In fact, many individuals will need more money than the amounts cited in this report,” because the analysis does not factor in the savings needed to cover long-term care expenses and the fact that many people retire prior to becoming eligible for Medicare.

EBRI notes that in 2007 (the most recent data available), Medicare covered 64 percent of the cost of health care services for Medicare beneficiaries age 65 and older while retirees’ out-of-pocket spending accounted for 14 percent. Private insurance and other government programs covered the remaining 12 percent of costs.

Stephen Miller is an online editor/manager for SHRM.

Related Article:

Study: Typical 401(k) Participant Can’t Retire Until Age 73, SHRM Online Benefits Discipline, December 2010

Quick Links:

SHRM Online Benefits Discipline

SHRM Online Health Care Reform web page

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