What would you and your spouse do with $351,000 when you retire?  

That may sound like a nice nest egg, but you may need every penny just to cover health care costs in retirement, including Medicare premiums and drugs after insurance pays its part, according to recent research. 

And that figure is conservative, the research notes. 

Americans already lack retirement savings. A New York Life survey of 2,202 adults last month showed only 4 in 10 have a nest egg, even though 74% expect to retire at 64. That shortfall means many retirees may find their golden years tarnished by financial stress.  

“People have so many different financial goals pulling them in a million different directions that they don’t always realize how high health care costs can be,” said Jake Spiegel, an associate at the nonpartisan, nonprofit Employee Benefit Research Institute and co-author of the health care savings report. 

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How much should you save for health care in retirement? 

Assuming retirees have Medicare Part A (hospital), B (medical), D (drugs) and G (expenses not covered by Part A and B such as coinsurance and copays), the report says the amounts below are what people need for a 90% chance of meeting their health care expenses, including premiums and out-of-pocket costs: 

◾ A 65-year-old man with average premiums will need $184,000 in savings and a woman will need $217,000. 

◾ Couples will need $351,000.  

◾ Representing an extreme case, a couple with particularly expensive prescription drugs will need $413,000 (accounts for out-of-pocket drug caps from the Inflation Reduction Act).

It's important to note these estimates don’t include services not covered by Medicare such as dental, vision, or hearing.

They also don’t include long-term care, such as community, residential or home-based care costs, which are “enormous” Spiegel said. 

A survey by senior-living finder Seniorly shows monthly assisted living costs can reach $8,248, and in-home care can total $3,861.

Using today's earnings and savings rates, it would take the average American 17.2 years to save for a year of assisted living, it said. 

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Why are health care costs so high for retirees? 

Medicare premium increases, the program's precarious financial footing, which casts uncertainty on how much can be fully covered by Medicare in years ahead, and cutbacks in employment-based retiree health programs all contribute, Spiegel said. 

Over the past two decades, health care costs have far outpaced inflation.

The costs of medical care, including services provided as well as insurance, drugs, and equipment, have risen 114.3% from January 2000 to June 2023, compared with an 80.8% increase in prices for all consumer goods and services, according to nonprofit health researcher KFF. 

"Health care costs tend to increase two or three times faster than the (cost of living) increases in Social Security income,” said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League, an nonprofit advocacy group. A recent league survey found one in five seniors spends more than $1,000 a month on health care. 

“There are so many retirees who just don’t have the savings to meet these costs – and that can have far-reaching consequences for other family members who want to provide some sort of assistance,” Johnson said. 

What can be done to help seniors? 

Financial advisers and health care experts say some of these moves could help ease the burden for seniors:

• ◾ Legislative changes – whether it’s reduced benefits, increased taxes on workers, or some combination of the two – might help shore up Medicare, Spiegel of the Employee Benefit Research Institute said. 
• ◾ Early planning, by putting money into a health savings account, modifying your home so you can stay as long as possible and saving money. Also, consider long-term health insurance. 
• ◾ Instead of signing up for Medicare, seniors can buy Medicare Advantage, also known as Medicare Part C, which is an all-in-one alternative to original Medicare. These plans often have a $0 premium and offer benefits like dental, vision and audio services.  

A 65-year-old man with a Medicare Advantage plan would need $99,000 to have a 90% chance of meeting his health care needs; a woman would need $116,000; and a couple $189,000, the benefit research institute report said.

Those are significantly lower savings targets, but “Medicare Advantage plans often have limited networks or may require approval before certain medications or services are covered,” it noted. 

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.