Healthcare costs for those retiring today continue to climb.
Milliman’s latest Retiree Health Cost Index projects how much money, on average, a healthy 65-year-old will spend on healthcare expenses in retirement. According to the report, in 2024, a healthy 65-year-old male can expect to spend between $128,000 to $281,000 a year, depending on what healthcare plan they enroll in.
The two most common healthcare coverage options chosen by Medicare-eligible retirees are Medicare Advantage Part D (MAPD) and Original Medicare with Medigap plus Part D. Those with an MAPD plan are expected to spend $128,000 on healthcare throughout their lifespan in retirement, while healthcare expenses under an Original Medicare with Medigap plus Part D plan increase to $281,000 for males. Mill
As women are projected to live longer than men, women with the same coverage could spend an average of $147,000 under a MAPD plan and $320,000 while enrolled in an Original Medicare with Medigap plus Part D plan, finds Milliman.
The average 65-year-old couple could expect to pay a combined total of $601,000 for an Original Medicare with Medigap plus Part D plan, which equals to $395,000 in savings, assuming a 3% investment return. Males under an Original Medicare Plus Medigap Plus Part D plan will need an average savings of $188,000 to afford their costs, while women will need $207,000. Those enrolled in MAPD plans assume lower costs, therefore males would need an average of $86,000 in savings while women would have to save $96,000.
Looking into how expenses will shift in the future, Milliman notes that short-term trends, like higher prescription drug costs, have driven cost expectations compared to last year. However, in a medium to long-term outlook, Milliman says there is “no anticipated change in savings needed under this scenario’s 25-year planning horizon as a result of changes in inflation.”
“Healthcare expenses are an important and sometimes overlooked component of retirement planning,” said Robert Schmidt, a Milliman principal and co-author of the Retiree Health Cost Index. “By taking a realistic look at their health status and healthcare expenses, and then budgeting accordingly, people can take steps to enjoy a less stressful, financially healthier retirement.”
Retiring early or later impacts health costs
Milliman’s analysis highlights the effects of retiring earlier or after age 65, noting that retirees could end up paying more or less depending on when they leave the workforce. For example, if a worker retires five years earlier at age 60, they could expect to pay 56% more for healthcare expenses compared to if they waited to enroll in an Original Medicare with Medigap plus Part D plan at age 65. Similarly, retirees could even pay up to 89% more in a MAPD plan.
However, those who delay retirement are likelier to earn more savings while spending less on healthcare costs, finds Milliman. Workers who retire at age 70, rather than age 65, could spend less than 29% for healthcare expenses if enrolled in an Original Medicare with Medigap plus Part D plan, and up to 30% less under a MAPD plan.
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
