Affluent Americans near retirement are “terrified” about the cost of health care, but they aren’t discussing it with their advisors, according to a survey by the Columbus, Ohio-based Nationwide Retirement Institute.
Nearly three-quarters of U.S. adults with $150,000 or more in annual income and over 50 years old list “out-of-control” health-care costs among their top fears in retirement. Yet 48 percent of the survey respondents who had retained a financial advisor were not discussing health-care costs with their advisor.
Most of the affluent survey respondents, 64 percent, said they were “terrified” about the potential impact of health-care expenses on their retirement plans.
“This year was the first year we looked at affluent adults and we were surprised to see that they still listed health care as one of their top fears,” said John Carter, Nationwide’s president of retirement plans business. “More than half of them were unaware of what their health-care costs would be moving forward.”
Carter said that this is the fifth year Nationwide has run a survey connecting retirement planning and health-care expenses.
More often than not, the respondents were avoiding health care conversations because they felt it was too personal an issue for discussion, as it involves both health and finances. One-third of the survey takers had not had a conversation with anyone about their medical expenses.
Still, 38 percent of the respondents who had engaged with an advisor said that they did not discuss health-care expenses because their advisor did not know enough about health-care expenses in retirement, indicating that advisors may be missing both a key planning topic and an opportunity to deliver more value for their clients.
“When we look across the years of the survey, we find that the balance of people who have talked to an advisor about this issue is going up, and more than half of our respondents believe that it is important to discuss this issue with an advisor,” said Carter. “I think we have to help consumers ask better questions of their advisors, like ‘how much should I expect to pay in healthcare expenses in retirement?’—it’s simple and specific to health care, and then the advisor can discuss some ways to save for health care to meet that need.”
Despite their income, affluent Americans are highly likely to look to federal entitlement programs to help cover the cost of medical care. Two-thirds of the respondents said that they would use Medicare to help pay for health-care costs, and 63 percent are planning to use some of their Social Security benefits. More than two-fifths, 42 percent, said that they would give all of their assets away to their children so that they could be eligible for Medicaid-funded long-term care.
The survey found that 59 percent were unsure what their annual health-care expenses might be. The remaining respondents estimated $22,849 in annual health-care expenses for themselves and their partners.