Americans ‘Terrified’ of This Retirement Issue

A third of older Americans can't pay a $500 bill

She doesn't like what she sees.She doesn't like what she sees.

Another reason for the efficacy of Health Savings Accounts—more than seven in 10 Americans nearing retirement say they are ‘terrified’ of what health care costs may do to their retirement plans.

A new survey from Nationwide finds one in three of those nearing retirement say they are not doing anything to save for health care costs in retirement, and would be unable to pay for unplanned expenses as low as $500.

For many Americans, fears migrate beyond the unexpected to impact every day health, according to the sixth annual Nationwide Retirement Institute survey. 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.

“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, 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.

A third of older Americans couldn’t pay a $500 medical bill

Most older Americans acknowledge they are unprepared for certain health care expenses, yet they’re not acting to save now.

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

Caregiving comes into play when discussing health care cost concerns

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.

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