Boomers Facing Retirement Very Concerned About
Health Care Cost, They Say
Most are concerned but few are taking any financial
action to do anything about it
16, 2014 – The overwhelming majority (86%) of baby boomers express
concern about the affordability of health care in retirement, but very
few pre-retirees admit they have taken financial steps to prepare for
health care costs in retirement, according to a study released today by Ameriprise Financial.
The Health, Wealth and Retirement study, which
surveyed more than 1,000 employed baby boomers ages 50-64 who are
preparing for retirement with at least $100,000 in investable assets,
asked these individuals about their attitudes toward health, health care
costs and the impact each may have in retirement.
When asked what they’ve done to prepare for funding
healthcare costs in retirement, only one in five (19%) surveyed say
they’ve taken one or more steps to prepare. One-fourth (26%) have
reviewed their options but have taken no action and another two in five
(40%) have thought about it but haven’t looked into it in detail.
Unfortunately, 15% of respondents haven’t begun to consider how they
will cover health care costs in retirement.
“Boomers understand that health care costs will be
a significant expense in retirement, yet many haven’t planned – or
simply don’t know how to plan – to fund these expenses,” said Pat
O’Connell, executive vice president, Ameriprise Financial.
“Fortunately, the national conversation around
health care is prompting people to consider their health and the choices
they make, as well as the need to build health care expenses into their
retirement and long-term financial plan. Pre-retirees have an
opportunity to translate this awareness into tangible steps to help
prepare for expected and unexpected health care costs and protect the
savings they’ve worked so hard to accumulate.”
Most pre-retirees fail to take specific
>> Few boomers have taken proactive
steps to prepare for their future health care expenses.
>> Only one-third (32%) have developed
an advanced directive (a written statement of a person's wishes
regarding medical treatment);
>> 23% have extended the age they plan
to retire in order to continue receiving health care coverage through
>> one in five (21%) have obtained
long-term care insurance and
>> only 17% have maximized savings in
an employer-sponsored health savings account (available based on
These numbers are concerning but there is also
reason to be hopeful: some boomers are considering taking action. About
one-third (32%) of respondents say they have thought about developing an
advanced directive and the same number (32%) say they’ve thought about
purchasing long-term care insurance. Another one in five (19%) have
considered contributing to a Health Savings Account to help fund health
care costs in retirement.
A large group (62%) of those preparing for
retirement can estimate the amount they may need to cover health care
costs in retirement based on “what they’ve heard and read.”
The average dollar amount these respondents predict
they’ll need (per household) is about $232,000, which is surprisingly
accurate based on data and independent estimates from other
organizations such as the Employee Benefits Research Institute. On the
other hand, only a small number (17%) of pre-retirees have actually
calculated a specific estimate for what they may spend on out-of-pocket
health care costs while another 37% have considered taking this
Boomers’ attitudes about health vary widely
Most pre-retirees (79%) believe that the healthy
lifestyle choices they make today could have an impact on achieving
their financial goals. Even more (88%) believe that these choices will
have a financial impact specifically by reducing the amount of money
needed for health care in retirement. The idea that boomers make the
connection between their health and their wealth is encouraging
Respondents hold both their health and their wealth
in high regard. When asked which aspect of success in life they most
wished to improve, more than one-third (38%) said their health and
fitness, and approximately another third (35%) said their wealth, while
the remaining chose other options including mental well-being, social
relationships and professional success.
These intentions are beneficial to living an ideal
lifestyle in retirement, and many pre-retirees are likely to be taking
actions to help attain a high quality of life in retirement and reduce
the amount they may spend on health care. Nearly two-thirds (62%) report
initiating a diet or exercise program as a strategy to reduce future
health care costs.
Unfortunately, despite their collective efforts to
remain healthy, a number of boomers have already experienced a serious
health event. One in four (26%) respondents say they or their spouse
have been impacted by such an event and half (54%) admit it has affected
Experiencing a costly health event before
retirement underscores the importance of planning for these needs in the
future. In fact, 78% of all respondents admit they’re at least somewhat
concerned about their personal health in retirement. This sentiment
makes it even more critical that boomers begin planning for how they may
fund such an event.
Many boomers look to financial professionals for
Given the complexity of planning for health care costs in retirement,
many pre-retirees plan on seeking help from a trusted source. In fact, a
majority (64%) of boomers expect a financial advisor to play at least
some role in discussions about health and health care costs in
“Maintaining health and preparing for health care
expenses is a crucial aspect of living the lifestyle you want in
retirement. Nobody can predict the future, but you can take steps and
seek the help of a financial professional to plan for it,” said
“Factoring health care expenses – and discussing a
plan for affording them with retirement income – into a comprehensive
long-term financial plan can go a long way toward feeling more confident
About the survey
The Health, Wealth and RetirementSM study was
created by Ameriprise Financial utilizing survey responses from 1,075
Americans ages 50 to 64 employed full time with investable assets of at
least $100,000. The online survey was commissioned by Ameriprise
Financial, Inc., and conducted by Artemis Strategy Group from June 26 –
July 11, 2014.
About Ameriprise Financial
At Ameriprise Financial, says it has been helping
people feel confident about their financial future for 120 years. With
extensive asset management, advisory and insurance capabilities and a
nationwide network of approximately 10,000 financial advisors. For more
information, visit ameriprise.com.
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