A new survey of pre-retirees ages 50-64 found that 62 percent are not at all confident they are saving enough to handle healthcare costs in retirement according to a new survey from the Society of Actuaries (SOA). Additionally, only seven percent of participants said they are very confident about having enough savings.
The survey analyzed the impact of the increased costs of healthcare and how it’s affecting consumers’ retirement plants. 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 today.
“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, ASA, MAAA, FCA and 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 findings from the survey, it’s also apparent there is a significant disconnect between what pre-retirees view as a manageable increase in healthcare costs and what is probably going to 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, more than two-thirds (68 percent) of pre-retirees said that only a one, three or five percent increase in annual costs would be manageable. However, in reality, according to estimates made by the U.S. Department of Health and Human Services in October 2010, 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–also 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,” says Tonya Manning, FSA, MAAA, EA, FCA and 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.”