When asked to name barriers to financial independence and early retirement, Americans are less concerned about uncertain market conditions or inflation, than they are about healthcare.
“While Americans are enjoying longer lifespans, which may mean covering healthcare expenses and long-term care costs for extended periods of time, they also face the increasing costs of healthcare,” says Matt Sadowsky, director of retirement and annuities with TD Ameritrade, which fielded a recent study. “The good news is that Americans do recognize that health costs should be a top priority when planning for retirement, with 57% showing interest in holistic wellness planning, including financial and physical health.”
Health is a motivator to retiring early
- Seven in 10 of those who identify as financially independent say health is a motivator to retiring early
- Three-quarters of financially independent believe retiring early will help them live longer
- In fact, only 15% of financially independent retirees report being stressed compared to 47% of their non-retired counterparts
Covering healthcare costs in retirement
- An overwhelming majority of Americans (76%) point to Medicare as the best way to pay for healthcare in retirement
- Yet more than half of pre-retirees are not confident that it will cover the bulk of their retirement medical expenses
- Other tools that Americans plan on using to tackle healthcare expenses include: supplemental health insurance (51%), health insurance (42%), and Social Security (41%)
- Forty-six percent of those surveyed are likely to max out their Health Savings Account (HSA) contributions
- Only 19% cite long-term care costs for a family member and unexpected costs to care for a family member as top worries about retiring early
“When planning for retirement, it’s important to factor in the healthcare expenses as part of the overall equation,” Sadowsky adds. “A comprehensive retirement plan should not only address market risk, it should also include strategies and instruments that help hedge against healthcare and long-term care costs.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
