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Life Health > Health Insurance > Life Insurance Strategies

Pre-retirees are terrified about health care costs

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More than seven in 10 Americans nearing retirement say they are terrified of what health care costs may do to their retirement plans, according to the sixth annual Nationwide Retirement Institute survey conducted by Harris Poll. Nearly three in four older adults say one of their top fears in retirement is out-of-control costs for health care.

“Year after year Americans cite health care costs as a major source of anxiety, particularly as they approach retirement,” said John Carter, president of Nationwide’s retirement plans business. “However, in our sixth annual survey, we are seeing more fear and uncertainty than ever. Americans know changes are coming and they don’t have a clear sense yet of what health care costs will look like in the future, and that is adding to the uneasiness people were already feeling about this important issue.”

People are becoming increasingly reliant on federal programs to pay for their health care. The online survey of 1,316 adults over 50 finds that 64 percent plan to use Social Security and 61 percent use or plan to use Medicare as their main sources to pay for their health care costs in retirement. Shockingly, less than half use or plan to use savings to cover health care expenses.

Older Americans are unprepared

Most older Americans acknowledge they are unprepared for certain health care expenses, yet they’re not acting to save now. One in three of those nearing retirement say they are not doing anything today to save for health care costs in retirement.

Among actions that non-retirees are doing now to save for health care costs in retirement: 41 percent are building their savings, 33 percent are paying off credit cards and debt, 28 percent are investing and 27 percent are increasing 401(k) contributions.

Largely, Americans nearing retirement are worried about the unexpected. The top concern when planning for retirement — shared by three-fourths of non-retirees — is not having the funds to cover unplanned medical expenses:

  • One in three say they would be unable to pay for unplanned expenses as low as $500 today
  • More than half say they would be unable to cover more than $1,000 in unexpected expenses today
  • Twelve percent of older adults say they would not be able to cover any unplanned expenses today

“As workers prepare for retirement without savings it’s not surprising they are quite fearful,” Carter said. “One in three admit they couldn’t pay $500 in unexpected medical costs. Relatively common expenses, such as X-rays, can be close to $1,000 in out-of-pocket costs. A good way those living in and preparing for retirement can address their fear is to establish and follow a sound plan.”

For many Americans, fears migrate beyond the unexpected to impact every day health. More than one-in-three older adults with a household income under $150,000 say they’re attempting to deflect health care costs in retirement by taking negative steps including spending less on groceries, delaying seeking treatment for illnesses and skipping preventative screenings.

health care caregiver

Many pre-retirees report fears about becoming a burden to their family as they get older. (Photo: iStock)

Caregiving is a concern

As aging Americans need to rely on others for care, family members are often the first line of defense. Half of these adults are worried they will become a burden to their family as they get older, but 62 percent say they would rather die than live in a nursing home.

However, despite the overwhelming concerns about care, nearly half of older adults have not discussed health care costs in retirement with anyone. Half of married adults haven’t talked with their spouse about it, and eight in 10 adults with children haven’t talked to their children about their plan to address health care needs in retirement, most often because they don’t want to worry them.

“Older Americans seem to be paralyzed by their fears when it comes to addressing health care costs in retirement,” Carter says. “In a day and age with so many unknowns around health care, it can be easy to avoid the conversation, but that is the first and most important step to ensuring you and your family have a plan for future care.”

Financial advisors can help

Fifty-seven percent of those who have a financial advisor haven’t talked with their financial advisor about health care costs; most commonly because they consider it a personal issue.

Of those who have discussed retirement with a financial advisor, 75 percent say it is very important or important their advisor talks to them about health care costs, compared to closer to half (53 percent) last year.

Even more see their advisor as a good source of information on the topic — with eight in 10 who have discussed retirement with a financial advisor saying their advisor is well-equipped to discuss health care costs in retirement. While only 28 percent of older adults work with a financial advisor, the survey finds that, of those who do, 65 percent plan to discuss health care costs with an advisor.

About the survey

This survey was conducted online by Harris Poll on behalf of The Nationwide Retirement Institute between September 14 and September 22, 2016, among 1,316 U.S. adults aged 50 or older, including 782 adults who were not retired (non-retirees or nearing retirement), 970 married adults, 510 adults who work with a financial advisor and 1,014 adults who have children. Results are weighted to be representative of U.S. adults over 50.

See also:

Life settlement = solution to rising senior health care costs

Most Americans concerned about health care expenses in retirement

The wildcard of retirement planning: health care expenses

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