Americans’ retirement incomes are substantially reduced by Medicare’s high out-of-pocket costs, a Center for Retirement Research at Boston College study finds. According to the paper, a 2012 estimate finds the average household spends $197,000 in total for OOP costs during their retirement years. The project used data from the 2002-2014 Health and Retirement Study to calculate benefit ratios after out-of-pocket expenses.
According to the research, on average OOP costs were nearly 43-hundred per year in 2014, with about two-thirds of that spent on premiums. Less than two-thirds of Social Security benefits and only about 80 percent of retirement income was available for spending on needs outside of medical care.
The study’s authors say costs are expected to continue to rise after the effects of the implementation of Part D and the Great Recession wear off. They expect OOP costs to reduce Social Security benefits available for non-medical spending by another few percentage points by 2026. On top of that, the 2017 Medicare Trustees Report suggests medical costs will surpass Social Security benefits in the coming years.