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Health care costs, lack of savings might contribute to lower standard of living for future retirees, study finds

[Feb 19, 2008] Sixty-one percent of baby boomers and members of Generation X are "at risk" of being unable to maintain their standard of living in retirement, in part because of rising health care costs, according to a study released on Tuesday by the Center for Retirement Research at Boston College, the AP/Houston Chronicle reports.

The federal government estimates that an individual's cost for Medicare premiums, copayments and cost-sharing is about $3,800 annually and about $7,600 annually for a retiring couple.

Costs for health services not paid for by Medicare -- such as dental and eye care, and hearing aids -- total about $500 per individual annually.

According to the study, an individual would need to save about $102,000, and a couple would need to save about $206,000, to cover the costs of health care in retirement.

However, the median retirement savings balance for households approaching retirement is $60,000, the study found.

Without considering health costs, 44% of baby boomers, people born between 1946 and 1964, and Gen Xers, people born between 1965 and 1974, are at risk of being unable to maintain their standard of living in retirement, according to the study.

Alicia Munnell, director of the center, called the estimates "shockingly large," adding, "The most effective step is to plan on working a few years longer" because that "cuts the percent at risk by about 10 percentage points." She also said that healthy habits such as maintaining a normal weight and exercising more also can help to hold down an individual's health care costs (Alt Powell, AP/Houston Chronicle, 2/19).

The study is available online.