May 5, 2011

Majority of Americans Underestimate Health Care Costs in Retirement

Just 8% of consumers correctly anticipate how much health care will cost

More than 90% of consumers don't know or underestimate how much health care will cost them in retirement, a survey released Wednesday by Sun Life Financial found. Forty percent say they have "no idea" how much health care will cost, and 75% don't have a plan to cover the cost of care after they retire.

Center for Retirement Research logoA 2010 report from the Center for Retirement Research found that a healthy 65-year-old couple can expect to pay $260,000 for health care related costs. Just 8% of consumers in Sun Life's survey anticipate costs could reach that level.

This is especially important for workers approaching retirement. Just 30% of workers in their 50s have a plan to pay for health care in retirement. Among workers in their 60s, 40% have established a plan.

Janet Whitehouse, senior vice president and general manager of Sun Life Financial’s individual life insurance division, stressed how lack of preparedness could affect retirees' wellbeing.

“People will live happier, more fulfilling lives in retirement if they can better plan for unforeseen healthcare needs,” Whitehouse said in a press release. “If you take action because you’ve reasonably anticipated your future healthcare needs, your sense of wellbeing increases, and you can focus on living life to the fullest."

Wealthy clients are not immune to underestimating their health care needs in retirement. Three-quarters of workers with over $250,000 in assets said they are confident they'll be able to pay for health care after they retire, but only 26% have established a plan to do so.

Overall, consumers are largely pessimistic about their ability to pay for health care after they stop working. Forty-three percent say they are "not at all confident" and just 9% say they are "very confident."

If there's good news, though, it's that Americans are adopting healthier lifestyles. More than half of respondents said they have made lifestyle changes as a way to fend off higher health care costs in the future; 12% say they have made "major" changes, although the survey did not identify what qualified a change as "major."

While only 9% of respondents said they have already borrowed from their retirement accounts to pay for a health emergency, 51% think they'll never be able to replace the money they used.

With unemployment still over 8%, Americans may have more immediate reasons for taking a job, but across all age groups Americans agreed health care benefits are an important factor in deciding whether or not to accept a position. Almost one-quarter called health benefits the "single deciding factor" in their decision to accept a job.

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