Lifetime Retirement Health Care Costs for Average 65-year-old Couple Retiring in 2015 Projected to Exceed $266,000; Expected to Rise to More than $320,000 in 10 Years

DANVERS, Mass., March 25, 2015 /PRNewswire/ -- HealthView Services today published its 2015 Retirement Health Care Costs Data Report, which shows average expected retirement health care costs for Medicare B, D and Supplemental insurance for a healthy couple retiring this year at 65 years of age will be $266,589 in today's dollars.  For a couple retiring in 10 years at 65, expected costs will rise to $320,996, underscoring the impact of rising health care cost inflation.  While the report provides comprehensive perspective on overall retirement health care costs, it also breaks down these costs into components to support informed retirement planning decisions.

The data reveals that retirement health care costs are even higher when expected dental, vision, hearing, co-pays and all other out-of-pocket costs are included.  With these additional components, total projected retirement health care costs rise to $394,954 for a couple retiring this year at age 65.  For a 55-year-old couple retiring in 10 years, total lifetime health care costs are expected to be $463,849.  The 2015 report reveals an increase in total year-over-year projected lifetime retirement health care costs of approximately 6.5 percent.  These estimates do not include the cost of long-term care services.   

"The report demonstrates that health care costs will account for a very significant and growing portion of retirees' budgets," said Ron Mastrogiovanni, Founder and CEO of HealthView Services.  "The data also shows that Medicare-related costs are only part of the story.  Retirees need to plan for health-related expenses not covered by Medicare, and the potential impact of income-based Medicare surcharges." 

The report draws upon HealthView Services' actuarial and physician reviewed retirement health care cost calculation methodology, year-end 2014 health care cost data from 50 million cases, and a range of additional data sources.  Prior year data comparisons draw upon year-end 2013 data. 

These average cost estimates assume that a couple's retirement income falls below the $170,000 ($85,000 for an individual) Modified Adjusted Gross Income threshold at which surcharges are added.  Retirees whose income exceeds this amount will face Medicare surcharges of between 35% and 200%, further increasing their retirement health care cost burden.

The report shows that rising health care inflation will continue to drive costs higher.  Consistent with key government data sources, HealthView expects health care cost inflation to return to an annual average of 6% up from 3.6% in 2014, more than four times the CPI increase of 0.8%.  Anticipating cost benefits of the Affordable Care Act and modest inflation rates, health care inflation is expected to continue to be a multiple of CPI and significantly outstrip Social Security cost of living adjustments.

With Social Security the most significant source of retirement income for many, the report shows health care will account for a rising percentage of Social Security benefits.  Drawing upon year-end 2014 data, for the average 66-year-old couple retiring this year, who are eligible for full Social Security Benefits, HealthView Services' Retirement Health Care Cost Index© reveals total health care costs will consume 67% of their lifetime Social Security benefits.  For a couple retiring in 10 years at 65, approximately 90% of their lifetime Social Security benefits will be required for health care expenses.  The Index is calculated based on average Social Security benefits of $25,332 in 2014, and assumes annual 2% COLA adjustments.  The data also assumes that a couple optimize Social Security payments at their full retirement age.

"The report shows retirement health care costs on track to exceed the Social Security benefits many retirees are relying on," adds Mastrogiovanni.  "While wealthier Americans have other sources of income to draw upon, middle class Americans with more modest savings are likely to face difficult choices unless they have planned ahead." 

While average costs are a useful metric for scaling future retirement health care costs, the report notes that planning for these costs needs to be done at an individual level, highlighting the impact of a range of factors including health, gender, location, income and time to retirement, all of which have a significant impact on individual costs.

As an example, while most would expect healthy Americans to have lower lifetime health care costs, the reverse is true.  HealthView's data shows that total retirement health care costs are expected to be lower on average for someone suffering from diabetes, because of shorter life expectancy.  In fact, it reveals that total retirement health care costs for an average 55-year-old male with Type II diabetes living in Illinois will be approximately $118,000 compared to $223,000 for his healthy counterpart, primarily reflecting expected longevity of 76 compared to 86.   

In addition to the impact of health and longevity, the report highlights the impact of supplemental insurance based on state of residence.  Currently, the majority of retirees purchase supplemental policies to cover Medicare deductibles and co-pays that would otherwise have to be paid out-of-pocket. 

"These numbers are big, but they are manageable if planned for early enough," added Mastrogiovanni.  "For those impacted by Medicare Surcharges, surcharges can often be reduced by investing in products that do not increase a retiree's Modified Adjusted Gross Income.  The starting point for managing these costs is sitting down with an advisor to calculate expected health care costs and incorporating them into a comprehensive retirement plan."

The report shows that by saving $429 a month for 10 years at 55, an average couple will be able to accumulate sufficient savings to cover lifetime Medicare part D costs, reducing the burden of health care costs in retirement.  By saving $1,206 a month at the same age, they will have sufficient savings to cover Medicare D and supplemental insurance, dramatically reducing the impact of health care costs in retirement.  These savings rates assume an average 6% return on investment. 

HealthView Services (http://www.hvsfinancial.com) is the leading provider of retirement health care cost data and Medicare, Social Security, and long-term care retirement planning tools for financial advisors and individuals.  HealthView Services' HealthWealthLink is an integrated retirement planning tool that draws upon cost data from more than 50 million annual health care cases to assist financial advisors in preparing personalized estimates of retirement health care costs and implementing various retirement strategies to achieve clients' retirement goals.  HealthView also offers consumer-oriented health care cost calculators and information on its website.

HealthView Services is proud supporter of the 2015 National Retirement Planning Week®'s First Health Care in Retirement Planning Day. 

SOURCE HealthView Services