Health care represents one of the most significant challenges for people trying to plan their retirement. For one, it’s a variable that can be hard to plan for.
Not impossible, though, says Michael Schweitzer, global head of sales and distribution at HSBC. The firm surveyed over 18,000 workers and retirees to learn how they manage — or plan to manage — their health in retirement.
“Retirement can often invigorate and remind people of the importance of healthy lifestyle choices, but it is equally as important to consider adopting a healthy lifestyle in advance of retirement,” Schweitzer said in a statement.
Over two-thirds of respondents said they were unable to predict how much they would need to save to pay for health care in retirement, including 63% of households with more than $80,000 a year in income.
Over three-quarters of respondents see poor health as the No. 1 barrier to saving for retirement, with their partner’s serious illness a close second.
When you consider less than half of respondents consider themselves to be in good health for their age, it seems even more likely that poor health will prevent people from fulfilling their retirement goals.
So people recognize that they aren’t at an ideal level of good health and they acknowledge that it could present a problem when they’re ready to stop working; what should they do about it?
The report identified four actions pre-retirees can take to help them save more and have a healthier retirement.
1. Start saving.
Most important of course is that they start saving, and early. The paper found 72% of respondents over 45 want to retire in the next five years, but 37% say they won’t be able to. That’s mostly due to not having enough saved, although about a quarter said they had too much debt, or that they had dependents relying on them.
2. Start building healthier habits.
Retirees were more likely than those still working to get regular checkups, eat well, stay active, and take vitamins and medication to stay healthy. Those habits led to a higher proportion of retirees reporting good health: 52% compared with 42% of pre-retirees.
Pre-retirees were almost twice as likely to say something was preventing them from a healthier lifestyle, be it work commitments, lack of free time or affordability, especially among the youngest workers.
3. Plan for a longer retirement.
The longer respondents were retired, the more likely they were to say their financial situation had improved, but were much more likely to say their health was failing. Retirees reported better relationships with their spouse, with friends and other family, and a better standard of living and social life overall.
A quarter of pre-retirees who said they want to retire in the next five years said their work was having a negative impact on their health or mental well-being.
4. Consider how their needs may change.
Thirty percent of pre-retirees said they expect their health to get worse when they retire, compared to 26% who believe it will improve. In fact, they were more likely to worry about the impact of retirement on their health than their finances.
They should also keep in mind that their expectations may not match up with reality. Although poor health was cited as a significant barrier to saving by pre-retirees, just 18% of retirees said poor health actually stopped them from saving. The life events with the most significant impact on their ability to save for retirement were having children and buying a home.
“Having a financial plan can help demystify long term saving as well as help provide a stress free outlook for all stages of your retirement, both in sickness and in health,” Schweitzer said.
– Read Health Care Worries Grow as Investors Approach Retirement on ThinkAdvisor.