The most oft-cited barrier to saving for health care costs in retirement is the perception that one cannot afford to do so at this time.
Almost four-in-ten workers at least 50 years-old are not saving for health care costs, and many do not have plans to do so, according to a recent AARP report.
Just over one-fourth (28 percent) of respondents plan to begin saving for health care costs within the next few years. The most oft-cited barrier to saving is the perception that one cannot afford to do so at this time either because they are paying other expenses or taking care of others.
Thus, there is a sizeable gap between when respondents to the survey believe one should begin to save for health care costs and when they actually do. For example, 68 percent of workers believe one should begin saving at 35 years old or younger, but only 28 percent of 50+ workers began saving at that age,
While just over six-in-ten workers ages 50 and up do say they are saving for health care costs in retirement, more than half (55 percent) are most concerned they may not be able to afford them. This concern is heightened among younger workers. Women, too, are more concerned about this financial issue than men (61 percent vs. 51 percent).
Even High Net Worth investors rank health care costs as the biggest threat to their retirement security, according to a Spectrem’s Millionaire Corner survey conducted last December. Almost two-thirds (64 percent) ranked health care costs high above taxes and inflation as the biggest threat to their retirement. In non-Millionaire households with a net worth of at least $100,000 (not including primary residence), almost six-in-ten (56 percent) said they are concerned about spending their final years in a care facility, while 53 percent said their primary concern was having someone to care for them in their old age.
A previous AARP Public Policy report found that that health insurance premiums and co-payments are increasing faster than wages. In 1990, the average American spent $2,854 on health care costs. The amount had nearly tripled to $8,402 by 2010. Health care spending has grown at the rate of 5.6 percent per year between 2000 and 2010, outpacing the 2.4 percent of inflation and 2.9 percent for the gross domestic product or GDP.
Respondents to the new AARP report identify a wide variety of resources to cover at least some of their health care costs. Few expect any of these to cover all or most of their expenses. Medicare is the most commonly reported source (31 percent). Other sources include retirement and personal savings, Social Security, private health insurance and pensions.
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.