Americans Miscalculate Healthcare Expenses

Over 70% also don’t expect needing long-term care at some point in their lives, finds Jackson
healthcare costs
Image Credit: © Christian Delbert | Dreamstime.com

Healthcare costs in retirement are severely underestimated, argues a new report by Jackson that analyzes risk in retirement.

The findings, conducted in partnership with the Center for Retirement Research (CRR) at Boston College, is the third installment in a series of studies that highlights longevity risk and inflation risk throughout retirement. Its findings show that pre-retired investors are lowballing prospective healthcare expenses in the long-term, with nearly two-thirds anticipating spending at least $1,220 below the $8,600 annual estimate in costs.

Furthermore, only 27% of respondents believe they’ll need long-term care at some point in their lives. This was particularly true for women, who expressed higher concerns about healthcare risks but were less likely to anticipate requiring long-term care despite facing longer life expectancies, Jackson found.

Financial advisors are also sounding the alarm, as two in five question whether clients will be able to afford quality care or not.

“Retirement should be a time for security and stability, however, our research shows many households may be unprepared for the realities of the healthcare challenges and expenses they will face,” said Glen Franklin, assistant vice president of Research, RIA and Lead Generation Strategy for Jackson National Life Distributors LLC (JNLD), the marketing and distribution business of Jackson.

With a new administration settling in the White House, Franklin looks to policymakers to enact new regulation that would fund long-term healthcare programs for retirees. President Donald Trump has not stated whether his administration is prioritizing legislation to help retirees afford long-term care or healthcare costs.

“Our research is particularly timely given potential policy shifts resulting from the election outcome, as proposals addressing healthcare reform and federal funding for long-term care programs could significantly impact retirees’ healthcare costs and savings strategies,” he stated. “This further underscores the importance of working with financial professionals to prepare for an evolving landscape and proactively address healthcare risks in investors’ retirement plans.”

Researchers call for better regulation as advancements in medical technology and treatment are slated to increase healthcare costs within the coming years. According to the Peterson-KFF Health System Tracker, a tracking system that monitors U.S. healthcare trends and performance, the price of medical care including services, insurance, drugs, and equipment has increased by over 120% since 2000.

“These new survey data should be a wakeup call for policymakers, financial professionals and older Americans themselves,” added Andrew Eschtruth, director of the Center for Retirement Research at Boston College. “We are particularly concerned that too many people nearing or in retirement don’t have a good grasp of their potential healthcare needs and out-of-pocket costs, which could narrow their options when it comes time to pay the bills.”

In the meantime, Jackson reports that pre-retirees are considering spending down their assets to qualify for Medicaid. Over 60% of investors surveyed said they plan to or may consider spending down assets to qualify for Medicaid as a long-term care funding solution but may be underprepared for the life changes that come with doing so.  

Jackson’s research, fielded between July 12 to August 2, 2024, included online surveys of more than 400 financial professionals and 500 investors with at least $100,000 in financial assets between the ages of 48 and 78 years. Respondents were required to participate in, or lead, household financial decisionmaking.

SEE ALSO:

Americans Expect AI to Increase Lifespan—And Healthcare Costs

Healthcare Costs in Retirement Likely to Far Exceed Americans’ Expectations

Healthcare Costs in Retirement: What to Expect

Amanda Umpierrez
+ posts

Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.

Related Posts
Total
0
Share