Health Care Costs Drive Up the National Retirement Risk Index

Posted: 8 Mar 2010

See all articles by Alicia H. Munnell

Alicia H. Munnell

Boston College - Center for Retirement Research

Mauricio Soto

International Monetary Fund (IMF)

Anthony Webb

Boston College - Center for Retirement Research

Francesca Golub-Sass

Boston College - Center For Retirement Research (CRR)

Dan Muldoon

Center for Retirement Research at Boston College

Date Written: February 2008

Abstract

The National Retirement Risk Index has shown that even if households work to age 65 and annuitize all their financial assets, including the receipts from reverse mortgages on their homes, 44 percent will be 'at risk' of being unable to maintain their standard of living in retirement. More realistic assumptions regarding earlier retirement and reluctance to annuitize 401(k) balances or tap housing equity would put the percentage 'at risk' even higher. But these previous analyses have not addressed rapidly rising health care costs. When these costs are included explicitly, the percentage of households 'at risk' increases dramatically.

This brief explores how rapidly rising health care costs enter the NRRI calculations. It begins with a recap of the NRRI, then describes the health care landscape facing older Americans, and finally reports the results of incorporating retirement health care costs explicitly into the Index. The results show that once health care is considered explicitly, the percentage of households that will be 'at risk' rises from 44 percent to 61 percent. As always, the percent 'at risk' is greater for those at the low end of the income distribution. And later cohorts show more 'at risk' than earlier ones due to the combined effect of a contracting retirement income system and continually rising health care requirements.

Suggested Citation

Munnell, Alicia and Soto, Mauricio and Webb, Anthony and Golub-Sass, Francesca and Muldoon, Dan, Health Care Costs Drive Up the National Retirement Risk Index (February 2008). Available at SSRN: https://ssrn.com/abstract=1118947

Alicia Munnell (Contact Author)

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States
617-552-1762 (Phone)

Mauricio Soto

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Anthony Webb

Boston College - Center for Retirement Research ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States

Francesca Golub-Sass

Boston College - Center For Retirement Research (CRR) ( email )

Chestnut Hill, MA 02167
United States

Dan Muldoon

Center for Retirement Research at Boston College ( email )

Fulton Hall 550
Chestnut Hill, MA 02467
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
366
PlumX Metrics