Retirees' healthcare: What! Save an extra $332,000?

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    Medicare recipient Marilynn Garfield of Delray Beach, Fla., (foreground) attended an annual town hall meeting on healthcare reform last week.
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For three decades, financial planners have told you to eat your oatmeal and save for retirement. Now, get ready for the aftershock.

American will have to save for healthcare, too. A lot. Assuming a generous 35 years of retirement and very modest increases in Medicare premiums, First Command Financial Services in Fort Worth, Texas, estimates the typical retiree couple will have to stash away $332,000. (That's in addition to funding retirement.)

How much does the average American couple expect it needs to save for that contingency? About $66,000, according to First Command's latest financial behaviors index.

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"People are really worried about healthcare costs now and in the future," says Scott Spiker, CEO of First Command, in an interview. But "there's a huge gap between what they're preparing and what it's going to take. This gap is only going to get bigger."

Assuming higher out-of-pocket costs, the couple could need $635,000 if the pair retire today and $1 million if they leave the workforce in 2018, according to an Employee Benefit Research Institute report (.pdf) last year.

The gap is reminiscent of the mismatch between Americans' retirement savings and retirement needs in the 1980s, when employee-funded 401(k) retirement plans first began to replace pensions.

Of course, the Obama healthcare plan may change today's healthcare calculation – for better or for worse.

The president has talked of typical families saving up to $2,500 a year on insurance premiums as government cuts waste, technology improves, and insurers get reimbursed for high-cost situations.

Numerous critics think healthcare reform will increase healthcare costs for Americans – or cut benefits in a Medicare program already stretched thin and running out of money.

That's why many financial planners are starting to emphasize the coming burden of healthcare costs.

"In the '80s, retirement was the big thing," says Ron Testa, certified financial planner with First Command in Lakewood, Wash. "Now, it's everything," from saving for college to saving for healthcare.

And it's not any easier getting people to change their savings habits. After three decades of trying to convince people to contribute to their 401(k) plans, fewer than half of US private-sector workers participate in one.

"It's rare that we see anybody who's on track to achieving their goals," says Mr. Testa.
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