A new report, "The High Cost of Living Longer: Women & Retirement Health Care," from HealthView Services reveals the significant cost of women's longevity, the impact on retirement savings caused by gaps in employment, and the savings required to cover expenses for the last four years of life. HealthView Services is the leading provider of retirement health care cost data and planning tools to the retirement industry. The company uses an actuary and medical professional reviewed approach to projecting future retirement health care costs based on more than 50 million annual health care cases, economic and government data.
Assuming average longevity for women and men, the report shows that women need to plan for much higher retirement health care expenses than men – with far less savings and benefits. The average expected future retirement health care premiums for Medicare B, D and supplemental insurance for a healthy woman retiring this year at 65-years-of-age and living to 89 are projected to be $235,526($153,079 in today's dollars), significantly more than the $199,946 ($135,321) for men, who are expected to live to 87. Adding in all out-of-pocket costs, hearing, vision and dental, women's total lifetime health care costs rise to $314,673 ($205,468), compared to $267,395($181,625) for men. These numbers assume Modified Adjusted Gross Income (MAGI) in retirement will not trigger Medicare Surcharges (Less than $85,000 or $170,000 for a couple).
"Living longer is both a blessing and a curse for women when it comes to health care," said Ron Mastrogiovanni, Founder & CEO of HealthView Services. "Health care costs for women and men are, on average, very similar during our lifetimes; however, because women live longer, they will have more years to pay premiums and other out-of-pocket costs. Driven by health care inflation, which is expected to rise at an average of 6% a year, costs in the last years of life will be the most expensive. For many women, these expenses will come at a time when savings may have been depleted by end of life care for a spouse."
Among the unique challenges facing women are lower lifetime earnings resulting from gender pay disparities and time out of the workforce to take care of family members. These two variables inevitably impact retirement savings and Social Security income. According to a 2015 Vanguard report, women's account balances averaged $79,572, compared to $123,262 for male participants; and according to the Social Security Administration, women over age 65 received approximately $13,150 in annual Social Security benefits, compared to about $17,106 for men of the same age.
"Many women will arrive at retirement having done an amazing job balancing careers and family caretaker roles, only to find their savings will not last through what should be their golden years," said Marcia Mantell, Author of What's the Deal with Retirement Planning for Women and CEO Mantell Retirement Consulting, Inc., who wrote the report's preface. "Combine lower incomes with incredibly important, but generally unpaid caregiving, and the result will negatively impact the Social Security benefits women will receive in retirement, because they have paid less into the system. The bad news is women will have more limited financial resources for a retirement that will cost more than men."
On average, husbands live two years longer and are 2.3 years older than their wives. This means women will spend approximately four years at the end of life on their own. For a healthy 55-year-old-woman living to 89, total health care costs between 85 and 89 are projected to be $146,471 ($75,200 present value), excluding long-term care. For women who will live longer, the costs will be even higher.
Meeting long-term care needs will be an additional challenge. The report uses a blended approach that reflects the probability of care to calculate reasonable savings to cover this potential expense. For a 55-year-old woman retiring at 66, the savings recommended to plan for end-of-life care are estimated to be $372,631 ($194,215 present value).
In addition to these significant savings challenges, married women face the risk that their partner may require long-term care at end of life. All too often, this event may deplete household assets to the point where the surviving woman may not have sufficient funds to meet her own end of life needs.
Rising divorce rates among older women, which may reduce available assets in retirement, are another significant concern. If the pressures were not significant enough, the paper also details the dramatic reduction in benefits available to women from last year's changes to Social Security optimization strategies.
"While the challenges facing women should not be underestimated, with careful planning and preparation, financial security in retirement is an achievable goal for many," added Mastrogiovanni. "It is our intention for the data in this report to serve as a starting point for discussions leading to plans that reflect the future needs of women in retirement."
The paper explores savings required to meet end of life needs. It shows that a 55-year-old woman can allocate $25,500 growing at 6% annually to cover her projected $146,471 total health care costs in the final four years of life. Alternatively, she could address $72,932 in basic Medicare premiums (Parts B and D) by investing $12,700 today at an estimated 6% annual return or increase 401(k), or HSA contributions by approximately $25.00 per pay period (assuming 26 pay periods) based on an employer match.
"With health care costs rising rapidly, and on course to be one of the largest expenses in retirement, it will be a challenge to make ends meet," adds Mantell. "Most of us will have provided care for others during our lives; it is important that we get the care we deserve at the end of ours. There's only one way for women to do this. Plan ahead."
HealthView Services (http://www.hvsfinancial.com) is the leading provider of retirement health care cost data as well as Social Security, and long-term care retirement planning tools for financial advisors and individuals. The company's signature service, HealthWealthLink, is an integrated retirement planning tool that assists financial advisors in preparing personalized estimates of retirement health care costs and associated strategies designed to achieve clients' retirement goals.