Terry Vine/Getty Images
Healthcare is America's biggest concern about retirement.
- According to a survey conducted by digital wealth manager Personal Capital and personal finance site Kiplinger, Americans' biggest concern about retirement is healthcare.
- Of the 850 people who responded to the survey, 530 said that their biggest worry about retirement is high healthcare bills.
- Healthcare is difficult for many retirees, and the expenses are already high. Models estimate that a couple retiring at age 65 will need between $197,000 and $285,000 for healthcare expenses alone. The average American barely has that saved.
- Read more personal finance coverage.
Many Americans are worried about healthcare costs in retirement, and they've got every reason to be.
Healthcare costs have ballooned in recent years, eating up wages and greater percentages of household incomes. Axios' Bob Herman reports that healthcare costs have risen from 14% of a household's budget in 1999 to 31% in 2017. For retirees, that's especially bad news.
A October 2019 survey of 850 Americans aged 40 and up conducted by Personal Capital and Kiplinger found that a majority of Americans are worried about healthcare costs in retirement. About 62% of Americans over 40 said that they're worried about costs in retirement, and it's no wonder - predicted healthcare costs exceed the amount that the typical retirement-age American has saved overall.
Estimates from Vanguard suggest the typical American couple will need about $197,000 for healthcare alone over the course of their retirement. A less-conservative estimate from Fidelity estimates the typical couple will need $285,000 for healthcare expenses alone.
Healthcare costs are higher than many Americans planned
Over the past 20 years, healthcare costs have gone up steeply. Americans who were saving for retirement during that time aren't necessarily prepared for that cost, and their account balances show it.
The average 55- to 64-year-old American has a total of $171,673 saved for retirement, according to Vanguard data. That's just over $25,000 less than the investment company expects the typical retiree to shell out for healthcare costs over the course of their retirement.
That means many retirees may have trouble making their savings last as planned. Women especially may have a harder time keeping up with healthcare costs, as the typical woman has less saved, and lives longer in retirement than her male counterpart. It's also more likely for women to need long-term care than men, according to data from AARP. Fifty-seven percent of women need support services, and 18% require it for more than five years. About 47% of men need long-term care services, but just 10% need services for more than five years.
Health insurance only covers some of the costs
Anyone planning to retire before becoming eligible for Medicare will either need to get health insurance coverage through an eligible spouse or partner, or get coverage through the Health Insurance Marketplace or even a part-time job.
For a 62-year-old retiree, a mid-tier healthcare plan through the Health Insurance Marketplace will cost about $1,075 per month, according to data from ValuePenguin. Even then, it doesn't cover dental, vision, or hearing healthcare costs.
Medicare, a public healthcare system that is available to anyone age 65 or older, won't be enough for most Americans. In its most basic form, Medicare coverage, simply known as Part A, covers only hospital visits. Things like prescription drugs, routine doctor's visits, and dental and vision visits will have to be covered through supplemental insurance, at an additional cost to retirees, or paid for out-of-pocket.
But even with Medicare, there are still costs involved. AARP reports that the typical premium for additional coverage through Part B, which covers doctor visits, was $104.90 per month. The typical retiree who enrolled in Medicare Part D, which covers prescription drugs, paid $29.20 per month in 2019 according to KFF. Combined, these two parts total $134.80 per month, and $1,617.60 per year. High deductibles make Medicare even more burdensome - a retiree paying for a hospital stay with only Part A coverage will pay $1,261 before this coverage kicks in.
As healthcare costs rise, retirees will need more money than ever.
- More savings and retirement coverage
- How to retire early
- The best high-yield savings accounts right now
- The banks with the best CD rates
- When to save money in high-yield savings
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.