Balancing Priorities

This risk threatens every woman’s retirement savings

Women over 50 are likely to enjoy decades in retirement, but few have any idea how much medical expenses will eat into their savings.

To that point, 65 percent of women aged 50 and over are unsure of what health-care costs will be for them and their spouse once they've stopped working, a study from Nationwide Mutual Insurance showed.

Spicer: White House working with lawmakers on health care
Spicer: White House working with lawmakers on health care

The insurance company polled 1,316 adults over 50 last September, including 676 women.

More than 75 percent of women in this age cohort were also uncertain of what they and their partners would pay for long-term care.

"A couple of things drive that uncertainty," said Roberta Eckert, vice president of the Nationwide Retirement Institute, the insurance company's research and education arm.

"Women 50 and over have typically been focused on raising families, getting the kids through college and saving for retirement; they haven't taken the task of doing a lot of research around health-care costs," she said.

A great underestimation

Of the women who did venture a guess as to how much they would pay each year for health care, including premiums, copayments and deductibles, the estimate was close to $10,251 for a couple.

That's a far cry from industry experts, who factor in cost drivers like health-care inflation and the fact that Medicare premiums are higher for those with high incomes.

A study from HealthView Services, a provider of health-care cost projection software, estimates that a 65-year-old couple who retired in 2016 spent $10,680 for health-care coverage that year.

This number includes premiums for Medicare parts B and D, which cover doctor visits and prescription drugs, respectively, plus supplemental coverage and out-of-pocket expenses.

Expenses will increase each year due to inflation, so those costs will reach $14,594 at age 70 and they will surpass $20,000 by age 75, according to HealthView.

Long-term care costs

Survey participants also thought that long-term care expenses for two were $52,112 per year.

They will be in for a rude awakening.

In 2016, the national median cost for a private room in a nursing home was $7,698 per month – roughly $92,000 a year, according to the Genworth cost of care survey.

Genworth, a provider of long-term care insurance, also found that the national median cost of a home health aide was $3,861 per month, or about $46,000 a year.

See below for assisted living expenses across the country.

"People have misconceptions on long-term care," said Eckert of Nationwide, referring to the stark difference between participants' estimates and the actual cost of elder care.

"Some people haven't seen a family member go through a long-term care event, and there is a wide range of options for care."

Preparing for expenses

Considering that health-care and long-term care costs could add hundreds of thousands of dollars to the overall cost of retirement, the best course of action is to get familiar with the additional outlay and save accordingly.

Estimates from the Employee Benefit Research Institute show that a 65-year-old man would need to save an additional $127,000 in order to have a 90 percent chance of paying for medical costs. A woman of the same age would need to boost her savings by $143,000, according to EBRI's analysis.

Those with high prescription drug costs will need even more money to make sure they can meet those expenses. EBRI's research reveals that married couples with these additional drug expenses will need as much as $350,000 to fund health-care costs in retirement — even if they are Medicare beneficiaries. This number excludes long-term care.

"Take a look at your own savings and investments, and be invested in a way that allows you to sleep at night and accommodate for these costs," said Eckert.

"You want to make sure you don't wake up at 65 with this looming cost you haven't accounted for," she said.