Health Care Costs Eat Into Retiree Income, Study Finds

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A new report from the Center for Retirement Research at Boston College found that a typical retiree is left with just 88% of their total income and 71% of their Social Security benefits after paying for out-of-pocket medical costs, including insurance premiums, doctor's visits, and prescription drugs. The findings highlight the financial pressure that health care costs can place on retirees, especially as the Social Security trust fund reserves are expected to run dry in 2033.

Why it matters

As health care costs continue to rise and the future of Social Security benefits remains uncertain, retirees are facing increasing financial challenges. Understanding the impact of out-of-pocket medical expenses on retirement income can help individuals better plan and prepare for these costs.

The details

The report found that both Medicare-only and Medicare Advantage policyholders spent a similar portion of their income on medical expenses, ending up with 87% and 88% of their retirement income respectively after out-of-pocket health care spending. This highlights the importance of carefully evaluating Medicare plan options to ensure coverage of preferred providers and services. The report also recommends that workers save in health savings accounts (HSAs) while they are still employed to help cover future medical costs in retirement.

• The Center for Retirement Research at Boston College released the report this week.
• The Social Security trust fund reserves are estimated to run dry in 2033.

What they’re saying

What’s next

As workers approach retirement, it will be important for them to carefully evaluate their Medicare coverage options and consider contributing to a health savings account (HSA) to help offset future medical costs.