As health care costs in the United States continue to rise and inflation remains stubborn, many Americans apparently are losing confidence in their ability to afford their health expenses and maintain their physical and financial wellbeing in retirement.
According to the annual Nationwide Retirement Institute Health Care Cost in Retirement survey, roughly 6 in 10 respondents (59%) lack confidence in their ability to pay for health care costs as they age, and 57% worry about their ability to pay for caregiving for their partner/spouse.
In addition, two-thirds of U.S. adults (66%) are terrified of what health care costs may do to their retirement plans and worry that a single large health care issue could ruin their finances for years to come. Even more Americans (72%) say that one of their top fears in retirement is their health care costs becoming out of control.
Making Tradeoffs
Consequently, with today's economic uncertainty putting a strain on their finances, Americans are making difficult decisions about their medical care that could have significant long-term implications.
Nearly 1 in 5 (18%) adults have postponed health care actions such as a medical procedure, physical exam, or renewing prescriptions in the past 12 months to save money. To find additional savings, 10% of Americans say they are considering downgrading their health insurance plan because of high inflation, including 19% of Gen Z, 11% of Millennials and 14% of Gen Xers.
Additionally, 6 in 10 adults (60%) say they would choose a health insurance policy with a lower premium but higher deductible plan which typically has a cheaper monthly payment.
While Americans are trading more comprehensive health coverage for lower monthly premiums, many do not have the means to cover an emergency health care expense. The survey found more than half of Americans (51%) say they could not pay off an unexpected $5,000 health care out-of-pocket expense.
AI’s Impact
The survey findings also reveal that financial planning challenges may be exacerbated by the potential for medical advancements brought on by artificial intelligence (AI) to extend lifespans. One in four Americans (26%) expect AI advancements in health care to add over a decade to their lifespan. Of those, Gen Z expects AI to add an average of 15 years to their life, Millennials 12 years, Gen Xers eight years and Boomers nine years.
This signals Americans could be paying for health care costs for significantly longer than they are doing today, and they need a plan that accounts for that, the study suggests.
"Advances in AI and health care technology in general are moving faster than ever and may help treat many of today's chronic diseases, as well as other health issues," said Kristi Rodriguez, senior vice president of the Nationwide Retirement Institute. "While this is good news, longevity requires more planning. That is why it is so important to consult with a financial professional to create a plan that prioritizes your health care needs now and for a retirement that could be longer than anticipated."
Better Planning
While many adults feel confident they will be able to maintain good physical health in retirement, almost half of those who are retired regret not taking better care of their health to save on health care costs in retirement.
In fact, an even larger majority do not or did not have a written financial plan that includes how to pay for health care costs related to their chronic conditions in retirement. Additionally, adults may be underestimating the need for health care specialists in retirements, and that may impact health care costs in retirement.
Americans also dangerously underestimate the average cost of health care in retirement, putting it at $55,343 when the actual cost in 2022 was almost triple that at $172,500 for an individual or $315,000 for a typical 65-year-old retired couple, according to Fidelity’s retiree health care cost estimates.
Additional findings show that nearly three-quarters (72%) of respondents said they wish they understood Medicare coverage better and the vast majority (70%+) responded incorrectly when asked basic questions about Medicare, such as what it covers, how Medicare Part B works, and cost considerations for different Medicare plans.
"Our survey shows that Americans need more knowledge, guidance, and ongoing support to make informed decisions about their financial plans," added Rodriguez. "By incorporating health care into financial planning conversations, financial professionals can help clients better prepare for the rising costs of health care."
The research was conducted online by The Harris Poll on behalf of Nationwide among 1,260 adults residing in the U.S., including 301 Gen Z (18-26), 310 Millennials (27-42), 307 Gen X (43-58), and 342 Boomers+ (59+). The survey was conducted Aug. 28–Sept. 11, 2023.
For additional information about the survey, visit: https://www.nationwide.com/lc/resources/investing-and-retirement/articles/health-care-survey-results
