Survey results also showed that a large percentage of current and future retirees are unsure about how much they should save to cover their future health care expenses in retirement – indicating a need for greater transparency as well as financial literacy about the costs of both anticipated and unexpected health care needs. Of note:
- Among retirees age 65+, 50 percent reported that they did not know or had no opinion on how much they will need for health care costs during retirement, and 45 percent could not say how much of their retirement savings is allocated to health care costs.
- Similar gaps in awareness are present among the younger population, as 36 percent of non-retired adults age 50 to 64 did not know or had no opinion on how much money their households will need for health care costs during retirement, and 40 percent could not say how much of their retirement savings is allocated to health care costs.
Key Differences in Savings
Lastly, the analysis examined savings rates by the health status and other personal characteristics of survey respondents in order to better understand how these key characteristics relate to retirement savings. The findings indicate that 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 significant economic barriers in paying for their care. For example:
- Nearly half (44 percent) of retirees age 65+ in fair or poor health have saved $20,000 or less for retirement, compared to 21 percent of retirees in very good or excellent health. Looking at future retirees, 36 percent of adults age 50 to 64 in fair or poor health have saved $20,000 or less for retirement, compared to 20 percent of future retirees in very good or excellent health.
- Thirty-three percent of retirees age 65+ (and 24 percent of future retirees) with chronic disease have $20,000 or less in retirement savings, while 10 percent of retirees (and 14 percent of future retirees) with chronic disease have $50,000 to $100,000 in savings.
- Thirty-nine percent of future retirees with household incomes between $35,000 and $50,000 have $20,000 or less in retirement savings. In contrast, only 10 percent of future retirees with household incomes between $90,000 and $135,000 have household retirement savings at or below $20,000.
Health status is of particular interest when planning for retirement because average out-of-pocket health care spending is generally higher for those in poor health. One study found that Medicare beneficiaries in poor health spent 2.5 times more on average out-of-pocket costs than their peers in excellent health.[24] Research has also found that poor health, along with low levels of education, increases the likelihood that individuals pursue early retirement, either by enrolling in the Social Security Disability Insurance program or claiming Social Security retirement benefits early.[25]
- [24] Cubanski J, Swoope C, Damico A, Neuman T. How Much Is Enough? Out-of-Pocket Spending Among Medicare Beneficiaries: A Chartbook. Kaiser Family Foundation. Published July 2014. Accessed April 3, 2017.
- [25] Venti S and Wise D. The Long Reach of Education: Early Retirement. Journal on the Economics of Aging. 2015; 6. Accessed April 3, 2017.