Columbus, Ohio – As health care costs in the United States continue to rise and inflation remains stubborn, many Americans are losing confidence in their ability to afford health care costs and maintain their physical and financial well-being in retirement, according to the Nationwide Retirement Institute® Health Care Annual Retirement expenses researchreleased today.
More than half of respondents (59%) lack confidence in their ability to pay for healthcare costs as they age, and 57% worry about their ability to pay for care for their partner/spouse.
The study also found that financial planning challenges could be exacerbated by the potential for artificial intelligence (AI)-driven medical advances to extend life expectancy. One in four Americans (26%) expect AI advances in healthcare to add more than a decade to their lives. Of these, Gen Z expects AI to add an average of 15 years to their lives, Millennials 12 years, Gen Xers 8 years and Boomers 9 years. * This signals that Americans may be paying for health care costs significantly longer than they do today, and need a plan that takes that into account.
“Advances in artificial intelligence and healthcare technology in general are moving faster than ever and could help treat many of today’s chronic diseases as well as other health problems,” said Christy Rodriguez, senior vice president of the National Institute on Retirement. “While this is good news, longevity requires more planning. That’s why it’s so important to consult with a financial professional to create a plan that prioritizes your health needs now and for retirement, which may be longer than expected.”
Americans are making trade-offs to manage health care costs
As Americans look to a future that may be longer than expected, today’s economic uncertainty is putting pressure on their finances and forces them to make difficult decisions about their medical care that could have significant long-term consequences.
- Nearly 1 in 5 (18%) adults have delayed a health action such as a medical procedure, physical exam or prescription refill in the past 12 months to save money
- To find additional savings, 10% of Americans say they are considering cutting their health insurance plan due to high inflation, including 19% of Gen Z, 11% of Millennials and 14% of Gen Xers
- Three-fifths of adults over 18 (60%) are betting on their health, saying they have chosen or would choose a health insurance policy with a lower premium but a higher deductible that typically has a cheaper monthly payment
While Americans trade more comprehensive health coverage for lower monthly premiums, many do not have the means to cover the cost of a health care emergency. The survey found that more than half of Americans (51%) say they cannot pay an unexpected health care expense of $5,000 out of pocket.
“As inflation and rising health care costs continue to be a pervasive concern, the most important action people can take is to consult with a financial professional,” Rodriguez said. “They can help develop personalized financial plans to ensure people are prepared to meet their health care costs without compromising their overall financial well-being.”
Implications for retirement planning
In a country where 100 million people live medical debt, it’s no surprise that two-thirds of US adults (66%) are terrified of what health care costs could do to their retirement plans and worry that a single major health care problem could ruin their finances for years forward. Even more Americans (72%) say one of their top fears in retirement is that their health care costs will spiral out of control.
With all this worry, 69% of Americans with chronic conditions (60% of US adults**) say they do not have a written financial plan that includes how to pay for health care costs related to their condition in retirement. Nearly 7 in 10 Americans (68%) do not work with a financial professional.
Conversations with financial professionals are key
In addition to developing plans that take health care costs and needs into account, financial professionals play an important role in guiding retirees through the complexities of our health care system and helping them choose the most appropriate plans based on their health needs and financial situation. Research shows that this level of guidance is desperately needed.
Nearly three-quarters (72%) of respondents said they wish they had a better understanding of Medicare coverage, and the vast majority (70%+) got it wrong when asked basic questions about Medicare, such as what it covers, how Medicare Part B works and cost considerations for different Medicare plans.
Americans also dangerously underestimate the average cost of health care in retirement, putting it at $55,343, when the actual cost in 2022 is nearly triple that at $172,500 for an individual or $315,000 for a typical 65-year-old retired couple.***
“Our research shows that Americans need more knowledge, guidance and ongoing support to make informed decisions about their financial plans,” Rodriguez added. “By including health care in financial planning conversations, financial professionals can help clients better prepare for rising health care costs.”
To help financial professionals guide these conversations, The Nationwide Health Care Cost Estimator uses proprietary health risk analysis and updated actuarial cost data to help financial professionals and clients estimate future medical and long-term care costs.
To learn more about the National Institute of Retirement’s 2023 Consumer Health Expenditure Survey, visit www.nationwide.com/healthcareinsights. In addition, financial professionals can visit www.nationwidefinancial.com/healthcareinsights to learn more.
The survey was conducted online in the United States by The Harris Poll on behalf of Nationwide among 1,260 adults aged 18+ living in the US (a “national sample”), including 301 Gen Z (18-26), 310 Millennials (27-42) , 307 Gen X (43-58) and 342 boomers+ (59+). The survey was conducted August 28 – September 11, 2023.
Data are weighted, where appropriate, by age, gender, race/ethnicity, region, education, marital status, household size, household income, and propensity to be online to bring them into line with their actual proportions in the population (for those aged 27+). Gen Z (18-26) data is age-weighted by gender, race/ethnicity, region, education, household size and online propensity.
To ensure that the national sample was representative, the data was initially weighted by generation (Gen Z 18-26, millennials 27-42, Gen X 43-58 and boomers + 59+) and then combined into a total age group of 18+ , and for trending For the purposes of previous survey waves that did not include Gen Z (18-26), the 27+ age trend group was combined.
Respondents for this study were selected from among those who agreed to participate in our surveys. Sampling precision of online Harris polls is measured using a Bayesian confidence interval. For this study, the sample data are accurate to the limits + 3.7 percentage points at the 95% confidence level. This credible interval will be wider among subsets of the study population of interest.
- The sample data for trend the sample is accurate with accuracy + 4.2 percentage points at the 95% confidence level
All sample surveys and polls, whether they use probability sampling or not, are subject to a host of other sources of error that most often cannot be quantified or estimated, including but not limited to coverage error, error, related to non-response, error related to question wording and response options, and post-survey weighting and corrections.
About the Harris Poll
Harris Poll is a global consulting and market research firm that seeks to uncover the authentic values of today’s society to inspire leaders to create a better tomorrow. He works with clients in three main areas: building a twenty-first century corporate reputation, developing a brand strategy, and tracking performance and earning organic media through public relations research. One of the longest running polls in the US, The Harris Poll has been tracking public opinion, motivations and social sentiment since 1963 and is now part of Stagwell, the challenger holding company created to transform marketing.