Too many older Americans not prepared for the reality of health care costs in retirement

Rising health care costs

The sixth annual Nationwide Retirement Institute® Health Care Costs in Retirement consumer survey reveals 71 percent of Americans 50 or over who are retired or nearing retirement used the word “terrified” to describe how they feel about health care costs in retirement. That’s up from 64 percent last year and 60 percent the year before.

 Nearly three-of-four of the 1,341 older adults surveyed by Harris Poll on behalf on Nationwide also 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. However, in this 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.

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. 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.

However, 57 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.

Visit the Nationwide Retirement Institute website to learn more.

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.

This survey is not based on probability sample and therefore no estimate of theoretical sampling error can be calculated.

Nationwide Investment Services Corporation (NISC), member FINRA. Nationwide Retirement Institute is a division of NISC.

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