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Survey: How Much Can You Expect to Pay for Health Care in Retirement?

For many retirees, health care will likely be their biggest expense. For this reason, it isn’t surprising that 41% of those participating in a recent Voya Financial survey said that their biggest fear about retirement expenses is the cost of health care. However, that same survey showed that 81% have not tried to figure out how much it will cost them. When asked to give a ballpark figure, 66% think it will be $100,000 or less. However, Voya says, citing 2017 figures from the Employee Benefit Research Institute, a 65-year-old man would need $127,000 to cover these expenses and a 65-year-old woman would need $143,000.

According to a 2015 study from HealthView Services, a 65-year-old, healthy couple can expect to spend $266,600 over the course of their retirement on Medicare premiums alone. An estimate from Fidelity is a little less: $245,000. However, neither includes out-of-pocket expenses or long-term care costs.

AAII Weekly Survey Question

Since many of our readers are nearing or are already in retirement, we wanted to get an idea of their thoughts on health care costs for retirees. Therefore, our latest weekly survey asked the following:

How much do you think a healthy married couple, retiring this year at age 65 and covered by Medicare, will spend  in out-of-pocket health care costs throughout retirement?

Here are the results:

In all, 2,019 readers responded to the question.

According to a recent survey from Financial Engines, a large portion of Americans significantly underestimate the projected costs of living in retirement, according to a recent survey by independent adviser Financial Engines. The study found that 58% of respondents at least 65 years of age and 76% of those between the ages of 55 and 64 believe the average married couple retiring at age 65 would need between $50,000 and $200,000 for health care. Financial Engines estimates the actual figure is $266,000.

It’s not to say that our reader isn’t “typical,” or they are good at using Google. Whatever the case, “only” 38% of respondents underestimated the out-of-pocket costs for health care in retirement.

Forty-percent of our readers answered “correctly,” selecting the estimated figure from Financial Engines.

The other 23% believe that out-of-pocket health care costs will be greater than the Financial Engines estimate of $266,000.

Weekly Special Question

Since health care costs are on the minds of many of those at or near retirement, we wanted to know what steps our readers are taking to try and limit their health care costs. So last week’s special question asked:

What steps have you taken to defray potential medical costs while in retirement?

In all, 275 readers submitted a response.

Most of the responses, around 42%, referred to using Medicare supplemental insurance and long-term care insurance to offset their health care costs while in retirement.

However, I was surprised and encouraged that many of our readers are taking a proactive approach to health care. Coming in a close second, with around 39% of responses, there was a large block of responses that dealt with taking better care of themselves through exercise, healthy living and preventative health care.

Further back, with roughly 15% of responses, are a group of readers who expect to use their investments or savings to cover any out-of-pocket medical costs while in retirement.

The final 5% or so of respondents currently do not have an explicit plan of how to defray their medical costs while in retirement.

Here is a sampling of the responses to the special question:

  • “I have a good Medigap [Medicare supplemental] policy that pays for my gym subscription and I hit the gym five to six times a week.”
  • “I have an HSA [health savings account].”
  • “Stay healthy by exercising, healthy eating, taking vitamin supplements, staying active and having annual physical checkups.”
  • “Delay retirement!”
  • “Bought a Medicare supplemental policy. Instead of long-term care insurance, which is subject to premium increases, my wife and I each bought a long-term qualified annuity contract which starts paying off at age 85.”
  • “None specifically. But I recognize it’s a problem. Not sure what can be done except saving a lot.”

Everybody has an opinion! Why not give us yours? Participate in our weekly member poll, updated every Monday, and see the results online at www.aaii.com/memberquestion.

 

 

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