Approximately 60 percent of people between the ages of 50 and 64 aren't sure they've saved enough money to handle healthcare costs in retirement, according to a new survey from the Society of Actuaries.
The educational, research and professional organization based in Schaumburg, Ill., found only 7 percent of survey respondents were confident about having enough savings for healthcare costs in retirement.
The survey analyzed how the continuing spike in healthcare costs is affecting consumers' retirement plans. Of this group of pre-retirees, one-fourth say they would delay retirement if healthcare costs continue to rise rapidly, and more than one-third say they won't do anything or they'll save less and just live life the best way they can.
"If nothing is done to curtail the rapidly rising healthcare costs, it is inevitable that costs will continue to make a significant dent in consumers' pocketbooks," said John Schubert, specialist leader for Deloitte Consulting, LLP. "The findings from this SOA survey clearly show that the continuing increase in healthcare costs is a real concern for pre-retirees and could potentially affect their ability to maintain their standard of living in retirement."
According to the survey, there is a disconnect between what pre-retirees view as a manageable increase in healthcare costs and what may happen over the next several years. When asked what the highest level of annual healthcare cost increases would be considered manageable for them in the long-term, 68 percent said that an increase of up to 5 percent in annual costs would be manageable. According to estimates made by the Department of Health and Human Services in October, however, healthcare costs are expected to increase, on average, by 6.3 percent annually, until the year 2019.
Findings from the SOA survey also revealed that outliving one's assets – known as longevity risk – when no longer working is of the most concern to only 28 percent of pre-retirees, and being able to afford health insurance only concerns another 26 percent.
"The combination of increasing life expectancy and greater healthcare costs could be devastating to personal finances if pre-retirees have not addressed these factors in their retirement plans," said Tonya Manning, an actuary specializing in retirement planning. "Actuaries can help individual consumers mitigate longevity risks by considering a wide range of factors, including the cost of healthcare, which will affect finances in retirement."
According to the SOA survey:
- 17 percent of pre-retirees said they are more likely to retire before the age of 65 (prior to eligibility for Medicare at 65) due to the increase in access to healthcare coverage.
- 14 percent of pre-retirees don't know what changes they will make to their retirement plans if healthcare costs continue to rise rapidly.
- Besides having enough savings to live on when no longer working, nearly one in five pre-retirees are concerned that they will not be able to cover the cost of long-term care, if needed.
The SOA findings were based upon a nationally representative online survey of 1,020 individuals.