A typical couple would have to save nearly $200,000 to pay for their out-of-pocket medical costs from the time they are 65 until they die, according to an important new study by the Center for Retirement Research at Boston College. Add in nursing home costs, and they are likely to need $260,000.

But that’s only part of the story. About 5 percent of 65-year-old couples will face catastrophic medical and long-term care costs exceeding $570,000, according to researchers Anthony Webb and Natalia Zhivan.They estimate those expenses would have exhausted the total financial assets of 85 percent of all retirees even at the peak of the stock market in 2007.

These conclusions are similar to prior studies by others, including Paul Fronstin at the Employee Benefit Research Institute. But they are nonetheless hair-raising. It is especially important to keep in mind that these costs are for people who already have Medicare. Indeed, those expenses include premiums for Medicare Part B and Part D (the drug benefit), Medicare Supplement (Medigap) insurance, retiree health insurance. and copayments for services not fluly covered by Medicare.  

Lots to chew over here, especially as we think about health reform, the CLASS Act, and the need for private long-term care insurance.