| |
| Malcolm Cheung |
.jpg)
Health care costs in retirement can loom large
Health care costs for retiring Americans, including nursing home care, average $260,000 and can exceed $500,000, according to new research conducted by the Center for Retirement Research at Boston College and underwritten by Prudential Financial.According to results of the study, "What is the Distribution of Lifetime Health Care Costs from Age 65," a typical married couple can expect to spend $197,000 on remaining lifetime health care costs, excluding nursing home care. And while this figure represents the average, many households will incur greater expenditures.
In fact, a typical household has a 5 percent risk that the present value of its lifetime uninsured health care costs will exceed $311,000. And when nursing home costs are included, the amount for a typical couple increases to $260,000, with a 5 percent risk of exceeding $570,000.
"Americans need to assess the possibility that they may incur out-of-pocket health care costs that are significantly higher than average," said Malcolm Cheung, vice president of Long Term Care for Prudential. "Without managing this risk, in some cases, a household may possibly have to either forego needed health care or rely on Medicaid."
The study concludes that when deciding how much to save for retirement and how rapidly to draw down 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.
Want more information? You can watch a seven-minute video of Alicia Munnell and Tony Webb from the Center for Retirement Research discussing the study's findings. You can also read the full study and news release. Want to talk to Malcolm? Email Lisa Bennett.
Long Term Care insurance issued by Prudential Insurance Company of America, Newark, NJ.
