Retirement health care costs are a worry for all generations

Joseph Lee, CFP®
Lee Financial Planning

Lee Financial Planning provides highly personalized guidance to help clients navigate life's challenges. We specialize in helping prepare for life's unexpected events and setting a course toward fulfilling and secure retirements.

Costs of health care in retirement are a major financial wildcard recognized by people of all stages of life, according to new studies. One new survey from the Nationwide Retirement Institute found that seven in ten older adults say one of their top retirement fears is out-of-control health care expenses. Even younger adults see the potential financial toll of health challenges in later life. Almost two-thirds of younger adults say how well they maintain their health today will have an important impact on their retirement financial security.1

The costs of health care during retirement can be significant. A healthy 65-year-old couple retiring today will need almost $390,000 to cover health care expenses, including Medicare Parts B and D, according to a recent study by HealthView Services. Ironically, the healthier you are, the more money you may spend over your lifetime on health care, due to your increased life expectancy, according to the study.2


Many retirees forget to account for dental care, which is not covered by original Medicare. Two-thirds of Medicare beneficiaries don’t have dental coverage, according to the Kaiser Family Foundation.


Moreover, these retirement health care cost estimates do not include long-term care expenses, such as extended home care or stays in assisted living in later life. The annual national median cost of assisted living is $48,000, according to Genworth Financial.


Health problems in later life can be a double financial whammy. Not only do health challenges increase retirement expenses, but they can also force people to retire earlier than expected. A recent study found that one in five people retired earlier than they planned due to health problems.3 Forced early retirement can reduce retirement savings by cutting short working years, reduce benefits, and increase the number of non-working years that need to be funded.


Younger adults understand the importance of prioritizing health and financially preparing for health care costs in later life, studies show. Seven in ten say prioritizing self-care and mental health will help them save on health care expenses in the distant future and would like to do more to prioritize their health. However, one in three younger adults admit health and wellness are not a top priority for them, and 40% admit they do not get any preventative care. Half say that 10-15 years from now they will wish they had taken better care of their health.


Health problems can cause financial problems, but studies show unhealthy finances can also impact physical health and life quality. Younger adults say that financial stress has a negative impact on their overall health (39%), harms their relationship with their spouse or significant other (35%), and hurts their performance at work (26%) and hurt their attendance at work (21%), according to the Nationwide Retirement Institute study.


In addition, almost three in four younger adults have taken "risky" actions to save money on medical related expenses, including delaying seeking medical help (33%), skipping a scheduled appointment to avoid a medical bill (22%), and taking less than the recommended prescription dosage (22%).


Nonetheless, there are several steps that can be taken at any stage of life to improve health and reduce the risks of health care costs. Healthy lifestyles and preventative care pay dividends in both a more fulfilling life and retirement and lower health costs. In pre-retirement, contributing to Health Savings Accounts can be an effective tool to grow pretax savings. During retirement, understanding Medicare options, choosing the plan that best meets your needs, and reviewing Medicare plans annually can help both optimize your health and minimize health spending.

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1.  2019 Nationwide Retirement Institute Health Care Costs in Retirement

2. CNBC, Retiring this year? How much you’ll need for health-care costs, July 2019

3. CNBC, This is a retirement surprise you’re probably not planning for, September 2019

This publication is designed to provide general information and is for discussion purposes only. The effectiveness of any strategy is dependent upon each individual’s facts and circumstances. This article does not provide legal, tax or account advice. Because of the possibility of human or mechanical error, the accuracy, adequacy, completeness or availability of any information is not guaranteed.