Paying for health expenses in retirement is the top expense concern among Americans, regardless of age, when compared to paying off debt and “lifestyle.”
The findings, from Franklin Templeton’s annual Retirement Income Strategies and Expectations (RISE) survey also notes that while Americans are concerned about paying for health expenses, almost half (48%) don’t know how they’ll pay for their healthcare costs in retirement.
“In order to address the top retirement concerns so many Americans are facing, it’s imperative to incorporate healthcare expense planning as part of a holistic retirement savings strategy,” Kevin Murphy, SVP, Head of Strategic Accounts for Franklin Templeton’s Defined Contribution, said in a statement. “Health Savings Accounts (HSAs) are a great example of one of the most efficient vehicles to save for medical expenses in retirement that can complement long-term retirement saving strategies.”
In fact, 75% of respondents who have a high deductible health plan (HDHP)—a requirement to contribute to an HSA—indicate that they use an HSA to save for medical expenses in retirement.
Further, 75% of people with HSAs indicated they know how they will pay for retirement medical expenses, compared to 36 % of respondents who are not using an HSA to save for medical expenses in retirement.
While HSAs can be a strong retirement savings tool, and the trend is moving toward more employers offering an HDHP as an option within their benefits package, currently only 31% of those surveyed have access to an HDHP.
“While it’s important for individuals who do have access to an HSA to understand the benefits and leverage them appropriately, the need to prepare for this large liability in retirement is critical to address regardless of access to this option,” Murphy added.
Additional RISE survey highlights include:
- Americans remain confident in Social Security. Seventy-one percent believe they will receive benefits. In fact, almost half (45%) are confident that they know how much of their retirement income will be replaced by Social Security.
- Only 33% of respondents work with a financial advisor, yet 60% of respondents consider a financial advisor important to retirement planning.
- More than half of respondents (54%) do not have a plan in place in the event they are no longer able to manage their own finances.
- Sixty percent of respondents are willing to pay for insurance that would guarantee a stream of income for as long as one lives or protects one’s retirement assets from dropping below a certain threshold.