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Healthcare costs substantial in retirement, EBRI says 2010-04-16 It may come as news to few older people, but healthcare is an expensive proposition. The Employee Benefits Research Institute estimates that a 65-year-old couple will need about $376,000 (in present-value terms) for their lifetime medical costs, even when Medicare's contribution is taken into account. Medicare covers about half the typical retiree's total cost. And, according to the EBRI, health savings accounts - into which a person can put pre-tax income to pay for medical care - don't make much of an impact. Because HSAs have contribution caps, their savings potential is limited, EBRI research associate Paul Fronstin says. In a study, Fronstin found that HSAs will offset only a fraction of a retiree's healthcare burden. "The maximum savings that can be accumulated in an HSA will be far from sufficient to fully cover the savings needed in retirement for insurance premiums and out-of-pocket expenses," he said. HSAs aren't worthless - they can be used to reduce a person's taxable income - but people shouldn't see them as a healthcare-cost panacea. The accounts might be useful as part of a savings portfolio that includes investments and contributions from home equity.  |
