Healthcare Expenses in Retirement (Part 1)

Healthcare Expenses in Retirement (Part 1)

The complication you should be discussing, but (probably) aren’t

We’ve all heard similar stories: Sally and Bob were planning to go cross-country to visit their grandchildren, but the ongoing expenses from his hip surgery and follow-up physical therapy prevented them from going this year.  Frank hoped to retire last year, but even with excellent medical insurance, his wife’s radiation treatments cost so much they can’t afford to lose his salary.  The bills from Pat’s unexpected medical tests were only partially covered by her health plan, so she’ll have to choose between replacing her outdated car and making her bathroom handicap-accessible.  These tales all have one thing in common:  people made careful plans for retirement only to watch them burn up in a blaze of unexpected bills.

The stories are followed by anxiety-inducing questions. Could that happen to me?  Will my retirement plans be sabotaged by unforeseen medical expenses?

You aren’t alone in your uncertainties.  Six in ten affluent, older adults are afraid that medical expenses may interfere with their retirement plans, and 73% say skyrocketing health care costs are one of their primary concerns in retirement, according to a new survey.

Released last month by the Nationwide Retirement Institute, the results of this online survey included more than 1,000 adults over the age of 50 with a household income of at least $150,000.  Although earlier surveys have provided a broad picture of medical expenses in retirement, this survey focused specifically on the perspectives of higher-income, older adults.  The study uncovered a hidden concern: affluent adults are overwhelmingly apprehensive about the effect medical bills will have on their retirement plans.

Bring Medicare into the mix, and an additional layer of angst appears.  Almost three quarters of older adults (72%) wish they understood Medicare better.  And 40% were somewhat/not confident at all about the ability of their current plan to cover unexpected medical costs beyond what is covered by Medicare.  Over half (56%) of respondents said they were very/somewhat concerned about having enough money to cover unplanned health care expenses in retirement.

Their concerns appear justified.  On average, these adults estimate they could cover just $5,174 in unplanned expenses today, yet they estimate their annual health care costs to be $22,849 for themselves and their spouses, if married.

But while these topics are at the forefront of many people’s minds, they often aren’t talking about them.  Further survey results showed that almost one third (32%) of affluent adults haven’t spoken to anyone, including their spouses, about their medical expense concerns, and 52% of respondents who already had a financial advisor had not spoken to that advisor about their health care cost concerns.

Instead of facing these matters head on and approaching tough discussions with knowledgeable advisors, affluent older adults are needlessly worrying in silence.


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