401(k) Specialist Issue 2 - 2023 - 6

401(k) NEWS YOU CAN USE
Retirement Savings Gap Could Create
$1.3 Trillion Burden by 2040
NEW RESEARCH by The Pew Charitable Trusts found America's
retirement savings gap could create a $1.3 trillion economic burden
through 2040.
The Pew study says as many as 56 million private sector workers
lack access to an employer-sponsored retirement plan. The analysts
who conducted the study for The Pew Charitable Trusts estimate
that such limited savings could lead to a cumulative additional cost
to the federal government of $964 billion between 2021 and 2040.
State spending on these programs, stemming from administrative
costs, required state match formulas, and supplemental state benefits,
totals another $334 billion over that period, resulting in the
$1.3 trillion projection.
Even with that social spending, Pew found many households
would be required to reduce their standard of living in retirement.
Quite the bummer so far, eh? But Pew points out that even
spurring relatively small savings over a worker's career could help
offset the effects of the projected shortfall. Additionally, the article
points out that 11 states have already launched automated savings
programs that allow people to set up state-sponsored IRAs to help
more private sector workers routinely put money away for
retirement. This year, lawmakers in more states are introducing
measures to expand those opportunities.
ONLINE
EXTRA
How Much a 65-Year-Old Retiring in 2023
Needs to Cover Healthcare Costs
$90,000 of savings in today's dollars), down from $137,000 in 2022.
A 65-year-old female retiree with the same coverage will spend approximately
$155,000 on healthcare expenses over the course of her
lifetime ($100,000 in savings today), down from $158,000 in 2022.
Interestingly, in 2023 a healthy 65-year-old retiree with Medicare
LATEST PROJECTIONS released in the 2023 Milliman Retiree
Health Cost Index estimates the total premiums and out-of-pocket
expenses a healthy 65-year-old can expect to spend on medical and
prescription drug costs in retirement.
A healthy 65-year-old male retiree with an MAPD plan will spend
$134,000 for healthcare in his remaining lifetime (equating to
6
ISSUE 2 2023 | 401kSpecialist.com
Advantage plus Part D (MAPD) needs to save slightly less for healthcare
costs compared to 2022, largely due to premium decreases
across Medicare Part B and MAPD plans, the Milliman report found.
This is despite a 3.4% increase in savings needed as a result of
recent high inflation driving up the expected short-term healthcare
cost trend.
" Our study found that inflation is likely to drive up healthcare
expenses for retirees over the next several years, more so than any
other factor, " said Robert Schmidt, a principal at Seattle-based
global consulting and actuarial firm Milliman and co-author of the
Retiree Health Cost Index. " When retirement planning, it's important
to understand the different plan options available and how they
impact coverage and cost, so you can make the best decision for
your health as well as your finances. "
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401(k) Specialist Issue 2 - 2023

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