In the midst of rising projections for health care costs, an Edward Jones survey found that 60% of Americans varying in age are concerned about paying for health care in retirement. Baby Boomers, the closest to retirement or already in retirement, are the most worried, with 41% reporting being “very” concerned. Only 19% of Millennials said they are “very” concerned.
“Health care expenses can be difficult to project, especially when you are decades away from retirement,” says Scott Thoma, Principal and Investment Strategist for Edward Jones.
However, according to research by Fidelity, a 65-year-old couple retiring in 2016 can expect to pay $260,000 for health care costs in addition to about $130,000 in long-term care costs. That estimate was the highest Fidelity has recorded since beginning annual calculations in 2002.
Medical conditions that tend to emerge later in life such as Alzheimer’s disease are another major concern for older generations. The Edward Jones survey found 51% of Baby Boomers know someone who suffers from Alzheimer’s. Thirty-Three percent of Millennials reported knowing someone with Alzheimer’s, which is the most common form of dementia.
“Unexpected conditions and medical expenses that manifest later in life pose a great threat not only to physical and mental health, but also to the financial well-being of both the care receiver and the caregiver,” says Thoma. “That’s why it is critical to start preparing early–proactive planning can ultimately help individuals protect their assets over the long term, even if health complications emerge during retirement.”
“The findings in the Edward Jones study are consistent with what we hear from Baby Boomers every day and underscore the need for families to include future health care costs in their long-term financial planning,”says Beth Kallmyer, vice president of constituent services at the Alzheimer’s Association.
The benefits industry is beginning to tout health savings account (HSAs), which work like a defined contribution plan for retirement health costs and offers multiple tax advantages, as a way to save for retirement health care expenses.