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Retirement Planning > Retirement Investing

Boomers ‘terrified’ of what health care will cost in retirement

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Turns out there is something even more terrifying to boomers than having their adult children move back home. It’s the thought of what their future health-care costs might be.

Nationwide Financial just released a survey that revealed that 61 percent of pre retirees are “terrified” of the havoc that health-related expenses could wreak on their retirement plans. That’s a 30 percent jump from a year ago when fewer than half of affluent pre retirees expressed the same sentiment.

Those views were gleaned from a Harris Interactive-conducted survey of 801 Americans over age 50 with at least $150,000 in household income. When asked what is their top fear in retirement, three-quarters pointed to out-of-control health-care costs. Yet, these very same boomers seem reluctant to take steps to address that fear, with 64 percent saying they have not met with a financial advisor to discuss retirement plans. Of those who have consulted with an advisor, only 22 percent have broached the subject of non-Medicare-covered medical expenses post-retirement.

John Carter, president and COO of retirement plans at Nationwide Financial, noted in a release detailing the study that with much confusion regarding PPACA coupled with rising health-care costs, many workers are worried about how to fund medical expenses in retirement. “More are realizing they can’t count on someone else to fix this problem and that they will have to fund their own health-care costs in retirement,” he said in a statement.

Clueless about Medicare, out-of-pocket costs

The Nationwide survey also underscored how a large swath of boomers remain misinformed about Medicare and what health care will cost them in retirement. On average, pre retirees calculate the annual out-of-pocket cost for medical care during retirement at $4,300. However, according to a 2012 Employee Benefit Research Institute study, out-of-pocket health-care expenses for a 65-year-old couple retiring today and living for 25 years would be $283,000, or $11,320 per year.

When it comes to Medicare, boomers expressed a similar lack of knowledge. Those who plan to enroll in Medicare estimate it will pay for 69 percent of health-care costs in retirement. When queried about how they arrived at that percentage, 61 percent guessed or said they didn’t know; 22 percent based it on their own research; 14 percent asked friends who had already retired; and only 3 percent said they were told by a financial advisor.

That estimate is far below the 51 percent that Medicare actually covers for health-care-related expenses. Further, Medicare does not cover long-term-care costs.

But boomers do want to learn more about Medicare: nearly two in three said they wished they understood Medicare coverage better, and 70 percent of those who discussed retirement plans with a financial advisor acknowledged it’s important to discuss health-care costs and Medicare when planning for their golden years.

Work longer

So how do they plan to pay for health care in retirement? Possibly by working longer, many said. Two in five boomers indicated they would delay retirement if they had to buy their own health insurance. Meanwhile, one in four said they will postpone retirement in order to keep their adult children on their employer-based health insurance plan.

About one-quarter (26 percent) of boomers said they do not anticipate retiring, up from 22 percent in 2012. Women are twice as likely as men to think they will never retire (36 percent versus 18 percent).

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