Why Is Healthcare in Retirement More Expensive for Women?

Retired Woman worried about high cost of healthcare in retirement

Although women and men have differing healthcare needs throughout their lives, the difference in the cost of healthcare in retirement between the sexes is truly shocking. Here are three amazing statistics:

  • A 30-year old woman will pay $548,098 for healthcare during her life compared to the $429,466 spent by a 30-year old man.
  • A 55-year old woman will pay $522,827 in retirement compared to $444,007 for a 55-year old man.
  • A 65-year old woman will pay $235,000 on healthcare premiums compared to $200,000 for a 65-year-old man.

All of the people in the hypothetical scenarios above are healthy.

Why Are Women Hit with Extra Costs?

There are several reasons for the extra healthcare expenses, the most obvious of which is longevity. On average, women have an average life expectancy of 89 compared to 87 for men. As a result, women must pay Medicare premiums for longer, including Part B and Part D premiums along with the cost of any supplemental insurance. The longer you live, the more likely you are to experience health problems.

A longer life expectancy also means a greater likelihood of spending time in a nursing home. According to a 2016 study by Genworth, the average monthly cost of a private room in a nursing home is almost $7,700.An American Association for Long-Term Care Insurance study found that women spend twice as long in a disabled state as men after the age of 65. The time spent triples that of men if both sexes live beyond the age of 80.

A Question of Income

The gender divide in wages exacerbates the financial problems faced by women in retirement due to high healthcare costs. A report by the United States Bureau of Labor Statistics in 2016 found that women earn 81% of the wages of men. Hispanic women earn just 61% of the wages of white men while African-American women earn just 67% of the wages of white men.

Lower lifetime earnings translate into reduced 401(k) savings and lower Social Security payments. At present, women over the age of 65 receive just $13,150 a year in Social Security compared to $17,106 per annum for 65-year-old men. The enormous 23% difference isn’t just due to lower lifetime earnings, however. More women file for Social Security at 62 than men of that age do, which results in reduced payments.

Unfortunately, the majority of women in this situation have little or no choice. A 2015 Vanguard study showed that women have an average of over $42,000 less in their savings accounts than men do. Female employees that attempt to start a family must also take time off work, and this can affect their chances of career progression. If you claim Social Security before the age of 70, you receive benefits of up to 25% less.

A 2015 study by the Employee Benefit Research Institute found that a 65-year-old woman needs $21,000 more in savings than a 65-year-old man does just to have a 50% chance of covering future healthcare costs.Another potential issue faced by women is if their spouse chooses a single-life annuity as his retirement payout option. In this case, his annuity income stops once he dies, and in many plans, his widow will have her health benefits discontinued. Fewer women have employee health insurance, and they are more likely to rely on their husbands’ insurance than vice-versa.

How to Handle the Extra Expenditure

Women can trim their healthcare expenses by choosing a higher risk, lower cost form of coverage. As women enjoy better health than men do, on average, they can take advantage by picking insurance with high out-of-pocket limits. Another obvious choice is only to see doctors within your insurer’s network, keep an eye on your plan’s annual benefit changes, and switch coverage when financially prudent.

Women must begin saving in their 401(k) account earlier than men must do so. Women can also look to the future and handle potential long-term care costs by choosing a life insurance policy with a long-term care “rider.”The policy pays money to the policyholder’s heirs if no long-term care is necessary.

Final Words

As women live longer than men do on average, and earn less money over their lifetime, the cost of living in retirement is a lot higher. However, if you prepare in advance, utilize the skills of an experienced financial advisor, and embark on a detailed savings strategy, you can reduce or even eliminate the potential retirement shortfall.

HealthView Services included some useful savings scenarios in its 2016 paper. For example, a 55-year-old woman can deal with her Medicare Part D premiums by investing $6,600. By setting aside $12,700 (and assuming a growth of 6% per annum), a woman of the same age can handle Part B and D premiums.While it requires a lot of planning, women can enjoy a healthy, happy, and stress-free retirement.