A new survey has many retirees worried for what is to come.
Nationwide, the average age of retirement is 63, and while everyone knows how important it is to save for retirement, a new HealthView Services report shows that retirees and those planning to retire soon will need to save a quite bit more than they expected.
And no, it is not the cost of living or personal care expenses that is hindering retired Baby Boomers. Rather, it is the cost of health care.
As of right now, an average 65-year-old couple planning to retire within the next year can expect to spend a staggering $404,253 in 2017 dollars throughout the course of their retirement simply on health care costs. For perspective, if the couple chose to use their Social Security towards health care alone, it would eat up a total 59% of their benefits.
HealthView Services recently released this data based off of a study that looked into retirement health care costs within the past years. The $404,253 price was based on a full 22-year retirement and assumed the person retires at age 65. Unfortunately, the calculation grows with every year past 65 — for example, someone who retires at age 67 can expect to pay 90% of their Social Security proceeds on health care alone.
The price fluctuation doesn’t help younger retirees either, as those who retire at 45 won’t even have enough funds from Social Security to cover health care costs as they get older. According to the Chicago Tribune, the nation’s rising health care costs will consume a whopping 120% of a 45-year-old’s expected Social Security payout.
On top of the average 22-year long retirement, the analysts at HealthView Services made the assumption that men would live to be 87, and women 89. And since women are statistically proven to live longer than men, they can expect to pay even more in out of pocket health care costs in the long run.
This survey poses a huge challenge for those who are looking to retire given the fact that 81% of retirees cited good health as the most important ingredient for a happy retirement. And considering that the majority of soon-to-be retired Baby Boomers aren’t saving as much as they need, this lack of planning can cause both financial and health ruin.
Ron Mastrogiovanni, the CEO of HealthView Services, explains to the Chicago Tribune that most soon to be retired Americans don’t save nearly as much as they should simply because it hasn’t been necessary to in the past. He explains:
“Most people are far underestimating what they will need. They assume that Social Security will cover all their basic expenses. That used to be the case, but not anymore.”
Mastrogiovanni adds that with previous generations, more people received higher retirement benefits or pensions from their employers. They also lived in a time when there was more inflation. Social Security’s annual cost of living payout is based on the nation’s overall inflation rate, but since it has held steady at only 1.9% since 2012, the Social Security payments have been less than in previous years.
With this number in mind, Mastrogiovanni hopes that Americans take saving seriously and hope they don’t skimp on routine medical exams just because they are afraid of the cost.
“That’s a very dangerous game to play,” he said. “You can downsize on some expenses, but not health care.”
