How do you know healthcare costs are killing us financially and physically? Even the rich are in a panic.
Three-fourths of wealthy Americans are afraid of how much healthcare will cost them in retirement, says a study from insurance and financial service company Nationwide.
It polled 1,000 “affluent” Americans over the age of 50 — affluent meaning they earn $150,000 a year or more. As healthcare costs soar, these Americans are becoming more reliant on federal programs to help pay them. But they don’t fully understand how they work.
They need the money but don’t how it works
Eighty-six percent are enrolled or plan to enroll in Medicare. Yet, 72 percent wish they better understood how the program works. Here are some of the concepts they have yet to wrap their heads around…
- You can’t enroll at any time: 23 percent
- It doesn’t cost the same for everyone: 29 percent
- Future changes to Medicare will impact their ability to sign up for it: 62 percent
“With changes coming to Medicare, premiums will increase for high-income retirees,” says Nationwide executive John Carter, “making it even more important for future retirees to understand the details and incorporate the program as part of a comprehensive retirement plan.”
Two-fifths (42 percent) admit they would give all of their money to their children so they could be eligible for Medicaid-funded long-term care.
Americans earning over $75,000 a year are more concerned about affording healthcare costs than those earning $30,000, according to a 2015 Bankrate study. This is probably because most wealthy people aren’t typically eligible for Medicaid.
“Affluent adults should not be planning to rely on Medicaid,” Carter says. “Not only is the program not designed for them, they lose personal control when it comes to long-term care.”
The costs of healthcare and long-term care in retirement
These are two significant chunks of a retirement savings plan, but most of these wealthy Americans don’t have an idea of what they will cost them.
Fifty-three percent are unsure of what their annual healthcare costs will be, while 65 percent don’t know how much long-term care costs are. Fidelity Investments estimates that healthcare will cost Americans $260,000 throughout retirement.
And long-term care costs usually involve saving for a nursing home, which most Americans greatly underestimate. Only a third of Americans think they’ll need one, but history has proven that half of us will, according to Lincoln Financial Group.
Most Americans expect to need around $54,000 for one, but in reality, the cost is closer to $100,000 — and is only going to rise over time. Historically, Americans would purchase a long-term care insurance plan. However, most can’t afford the rising costs of those either.
Long-term care insurance costs vary. But one thing is for sure, the older you get, the more expensive the policies become. That could be a reason why 48 percent of people taking care of an older relative don’t have a policy, according to Securian Financial Group. Half of them say it’s too expensive, and 10 percent don’t feel it’s a worthwhile investment.
“Healthcare costs are the biggest expected expense in retirement and should be a major factor when estimating retirement expenses since they are often costly and unexpected,” Carter says. “Yet, very few know what the actual costs could be, which makes planning difficult.”
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