With health care expenditures expected to exceed $3.5 trillion in 2017 and grow by an average of 5.6 percent each year through 2025, health care affordability is a growing concern for individuals and families.[1] Preparedness for rising health care costs is of particular importance for retired seniors as well as those who are still in the workforce and are planning for their future health care, housing, transportation, and other retirement expenses. These considerations are key to retirees’ health and well-being, and collectively can have a more powerful impact on overall health than medical care alone.[2]
While most people have given great thought to where they will live and what they will do when they retire, few are well-versed in planning for their future health care expenses. Yet without adequate preparation, the high costs of both anticipated and unexpected health care needs can adversely impact seniors’ overall health and financial well-being in their retirement years.
This issue brief, released in collaboration with United Health Foundation and the Alliance for Aging Research, examines the degree to which current and future retirees are prepared to meet rising health care costs in retirement, which are expected to range between approximately $260,000 for a 65-year-old couple retiring today, to nearly $600,000 for a 45-year-old couple retiring 20 years from now.[3] Based on analysis of a recently conducted survey of retired seniors (age 65+) and non-retired adults (age 50-64), as well as data from studies on recommended health care savings targets in retirement, key findings include:
Many current and future retirees are at risk of not being able to afford the high costs of health care in retirement. Sixty-two percent of retirees age 65+ and about three out of four non-retired adults age 50 to 64 have less in total retirement savings than what experts recommend saving for health care costs alone.
A high percentage of current and future retirees are unsure about how much to save to cover both anticipated as well as unexpected health care costs. Fifty percent of retirees age 65+ and 36 percent of non-retired adults age 50-64 report that they don’t know or have no opinion about how much money their households will need for health care costs during retirement – indicating a need for greater transparency and financial literacy about the costs of both anticipated and unexpected health care needs.
Current and future retirees with retirement savings of $20,000 or less are more likely to be in poor health, have chronic disease, and have lower incomes than those with higher rates of retirement savings. These individuals – many of whom will likely have significant health care needs – are also likely to encounter sizeable economic barriers in paying for their care.
Methodology:
1,997 adults age 50 and older were interviewed online to learn about the financial preparedness of both non-retired adults (aged 50-64) and retired seniors (aged 65+).[4] Results were weighted based on age, race/ethnicity, gender, educational attainment, and geographic region (determined by 2012 Current Population Survey). Additionally, attentiveness tests were utilized to ensure high levels of engagement and to monitor response speed. The survey of non-retired respondents has a margin of error of +/- 4% and the survey of retired respondents has a margin of error of +/- 3%
This issue brief builds on the 2016 America’s Health Rankings Senior Report, which found that marked growth in the prevalence of certain chronic diseases among the next generation of seniors aged 50 to 64, combined with a nearly 50 percent growth in the size of the senior population by 2030, will likely place a significant strain on the health care system. The 2016 findings, together with the results of this analysis, highlight the need for additional tools, supports, and actions that improve the health and well-being of today’s – and tomorrow’s – seniors.
- [1] Centers for Medicare & Medicaid Services. National Health Expenditure Projections 2015 – 2025 Forecast Summary. Updated March 2017. Accessed April 3, 2017.
- [2] Centers for Disease Control and Prevention. Social Determinants of Health: Know What Affects Health. Updated March 3, 2017. Accessed April 3, 2017.
- [3] Savings estimates assume that a 65-year-old couple retiring today will need about 22 years of savings. Future retiree savings estimates assume that a male-female couple will retire together at age 65 and have life expectancies of 87 and 89, respectively.
- [4] Polling conducted by Morning Consult.