Nearly half of soon-to-be-retired, high-net-worth Americans say they are terrified of what health care costs may do to their retirement plans, according to a new survey.

Nationwide Financial's "Healthcare Costs in Retirement Consumer Study" found that 45 percent expect health care to be their biggest expense throughout retirement, while $5,621 was the amount participants expect to spend on health care each year on average.

A second study of retirees 65 years and older conducted by Extend Health mirrored Nationwide’s findings, with 22.8 percent saying their top concern about retirement today is having adequate health insurance compared to five years ago when nearly 27 percent said their top concern was maintaining their pre-retirement standard of living.

“These concerns are completely justifiable as managing health care costs remains a major financial challenge during retirement,” Insured Retirement Institute President and CEO Cathy Weatherford told Insurance Networking News. “Social Security, alone, will be insufficient to cover these costs. To ensure that a boomer has enough assets to meet health care costs in retirement will require a substantial investment into the hundreds of thousands of dollars.”

Nationwide reported that pre-retirees who plan to enroll in Medicare estimated that Medicare will pay 68 percent of their health care costs in retirement, but when asked how they arrived at that percentage, nearly three in four guessed or didn’t know.

While Medicare provides health coverage to 46 million older or disabled Americans, the government program currently covers only about 51 percent of the expenses associated with health care services, according to the Employee Benefit Research Institute.

On average, a healthy 65-year-old man can expect cumulative health care costs including premiums to reach $369,000 through the remainder of his life, according to IRI research. For a woman, the cost is estimated at about $417,000.

“Insurers and the financial planning community can work with Boomers to deploy strategies that can significantly reduce the total investment needed,” said Weatherford. “IRI’s research shows that by purchasing an annuity with a guaranteed minimum withdrawal benefit, a 55-year-old male has the potential to reduce the initial investment by more than 70 percent.”

Register or login for access to this item and much more

All Digital Insurance content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access