Prudential Financial

As health care costs continue to escalate, individuals need to consider how to factor these expenses into their retirement planning, both in terms of how much to save and how to protect against key risks. The Center for Retirement Research (CRR) at Boston College recently conducted research to obtain a better understanding of the risk American households face of incurring exceptionally large health care expenses in retirement.

The CRR's issue brief, entitled "What is the Distribution of Lifetime Health Care Costs from Age 65?," offers some sobering statistics:

At age 65, a typical married couple free of chronic disease can expect to spend $197,000 on remaining lifetime health care costs — excluding nursing home care — while it faces a 5 percent probability that these costs will exceed $311,000. Including nursing home care, the mean cost is $260,000, with a 5 percent probability of costs exceeding $570,000. Less than 15 percent of households approaching retirement have accumulated that much in total financial assets.

To help manage health care cost risk, Americans can consider options such as long-term care insurance, guaranteed income products, or Medigap coverage.

To learn more about this timely subject, view the webcast (at right) featuring directors from the CCR. You can also read our report, "Planning for Retirement: The Distribution of Lifetime Healthcare Costs."