Medical Costs Derail Comfortable Retirements

The message about steeply rising healthcare costs has been at least partly received by older Americans, according to a new survey. Whether they can change their retirement planning to successfully accommodate these expenses is less clear.

National Financial sponsored a poll of relatively well-off people with $250,000 or more in household assets. Half were between ages 55 and 65, and half were older. In many respects, members of this group are poster children for successful retirements. They have saved and looked ahead to their later years in nearly all respects but one: healthcare expenses.

[See Health: The Biggest Determinant of Your Retirement Security.]

Nationwide Financial found that the group had not planned for their future health expenses, and had serious gaps in their understanding of Medicare and the scale of later-life health expenses. If there was a silver lining in the survey, it was that many people were well aware they might be facing very unpleasant consequences as a result.

"What we think is so important in getting out from a message standpoint is the specific word that people used in terms of their plans for retirement, and that word was 'terrified,'" says John Carter, president of Nationwide Financial Distributors. "They do have plans and they do have assets, but what they haven't done is incorporate out-of-control healthcare costs into these plans. And they haven't talked about this with their financial advisors."

While both age groups have substantial concerns about their retirement prospects, the younger group of people still getting ready for retirement had much more negative views. Nearly half of this younger group said yes when asked if they were terrified about the possible impact of healthcare costs on their retirement. Not surprisingly, they also had larger gaps in their understanding of Medicare than did older survey respondents.

[See Long-Term Care Needs Demand Your Attention Now.]

"Soon to be retired Americans who plan to enroll in Medicare estimated that Medicare will pay for 68 percent of their healthcare costs in retirement," Nationwide said. "When asked how they arrived at that percentage, nearly three in four [said they] guessed or didn't know." Nationwide cited research that found Medicare covers 51 percent of retiree healthcare costs.

The survey documented other misconceptions:

-- Average annual healthcare expenses during retirement were estimated at $5,621 per person. The actual average is projected to be nearly twice that amount.

-- There is a widespread belief that Medicare covers long-term care expenses, but it does not.

-- Long-term care will be needed by most older Americans. But the survey found such expenses were not included in people's efforts to calculate their retirement healthcare costs.

[See Social Security, Medicare Outlooks Worsen.]

Retirees and younger respondents generally agreed on the financial planning priorities that would help them achieve more successful retirements. But in all but one instance (travel expenses), retirees thought each of the top 10 planning priorities was more important than did people who had not yet retired. Here are the 10 most important topics that retirees identified for discussions with financial advisers, and the percentage of retirees who felt discussing the topic would be helpful:

1. A written retirement investment plan; 93 percent

2. How to best provide for loved ones; 91 percent

3. The safe level of annual retirement savings withdrawals; 86 percent

4. How invested assets will be tapped for income over the next 5, 10, and 15 years; 86 percent

5. Tips for getting the most out of retirement funds; 82 percent

6. How to pay for travel expenses; 75 percent (it was 84 percent for pre-retirees)

7. Current state of the economy; 71 percent

8. Expectations for healthcare costs apart from Medicare; 70 percent

9. Information about health and estimating retirement healthcare costs; 69 percent

10. Medicare's role in retirement; 68 percent

More From US News & World Report

Quiz: How well do you know India's economy?

Question 1

Which of these products is India the world's largest producer of?

Poll Choice Options
  • Wheat
  • Rice
  • Milk

Latest News

  • China's cooling property market a risk to economic growth

    China's property market could threaten Beijing's plan to manage a slowdown in growth, as evidence mounts of a rapid cooling in what had been one of the few strong spots in the world's second-largest economy. But marked decelerations in property investment and sales, and a contraction in housing starts in the first quarter, point to weakness in a sector that supports some 40 other industries, ranging from cement to furniture, and plays an important role in underpinning consumer confidence. "We …

  • Nikkei gains on upbeat U.S. corporate earnings, data

    Japan's Nikkei share average advanced on Friday after upbeat U.S. economic data and corporate earnings bolstered investors' risk appetite. The Nikkei was up 0.4 percent at 14,474.83 in midmorning trade after ending flat at 14,417.53 the previous day. …

  • For Morgan Stanley, playing it safe pays off

    On Thursday, Gorman proved himself right, by showing that his plan to lighten up trading risk and focus on wealth management is paying off. Morgan Stanley posted a 55 percent gain in first-quarter profit. Morgan Stanley also showed steady progress in using deposits from the wealth business to lend more. Gorman is working to give Morgan Stanley steadier earnings growth through increasing its reliance on businesses such as wealth management and underwriting, whose revenues are less likely to …

  • Wall Street Weekahead - Spring fever brings hope for U.S. earnings

    Several behemoths, including Apple, the largest U.S. company by market value, as well as Microsoft, McDonald's (MCD.N) and AT&T (T.N), are due to report earnings. They'll be accompanied by highfliers like Netflix and Facebook, giving the first real cross-section of the state of corporate America as temperatures rise across the country and investors hope to put the cold weather behind them. Strategists will also be looking for clues on how badly China's slowdown hits U.S. corporate results. …

  • Pay $1.3M For an Incredible Amount of Folk Music History

    Click here to view the full photogallery. In a bit of real estate news sure to delight history and music buffs alike, The Little House in Orangetown, N.Y.—a former gathering place for folk music elite like Woody Guthrie, Pete... …


  • This might well be India’s biggest Ponzi scam

    It was just too good to be true. Ashok Khital, 45, displays every symptom of a man who knows he's been conned. …

  • India's star studded football league

    High and mighty including Sachin, Salman & Sun Group buy ISL teams …

  • Leaderspeak with Rajesh Janey

    Rajesh Janey, President - India & SAARC, EMC shares many firsts in his life. …

  • Seed of Doubt

    Field trials have been allowed again in India. But two decades after their global launch, genetically modified (GM) crops remain controversial. …

  • Power Hungry

    Gujarat has power round-the-clock. Most other states do not. Why this will matter in the general elections. …

  • Etcetera

    The most keenly watched contest of the current general election will be the one for the Varanasi parliamentary seat, where the Bharatiya Janata Party's prime ministerial hopeful Narendra Modi squares off ... …

  • Economy vs Democracy

    As the country gets election fever, cash comes out of mattresses and turns into liquor, gifts, and food. But it is not bad for the health of the economy, reports Sarika Malhotra from the trenches. …


  • Most Actives
    Most Actives
    NamePriceChange% Chg
  • Price % Gainers
    Price % Gainers
    NamePriceChange% Chg
  • Price % Losers
    Price % Losers
    NamePriceChange% Chg
    Recent Quotes
    Symbol Price Change % ChgChart 
    Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
    You need to enable your browser cookies to view your most recent quotes.
  • Recent Quotes News

      Sign-in to view quotes in your portfolios.