Pre-retirees aged 50-64 are not confident they are saving enough money to handle healthcare costs in retirement.
Nearly two-thirds (62 percent) of pre-retirees ages 50-64 are not at all confident that 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.
This SOA 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 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," says 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."
Other key findings from the SOA survey include:
Only 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.
Fourteen percent of pre-retirees do not 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, ages 50-64, which had an error rate of plus or minus 3.10 percentage points.
About Actuaries - Actuaries bring a complex future into focus by applying unique insight to risk and opportunity. Known for their comprehensive approach, actuaries enable smart, more confident decisions.
About the Society of Actuaries - The Society of Actuaries is an educational, research and professional organization dedicated to serving the public, its members and its candidates. The SOA's mission is to advance actuarial knowledge and to enhance the ability of actuaries to provide expert advice and relevant solutions for financial, business and societal problems. The SOA's vision is for actuaries to be the leading professionals in the measurement and management of risk. To learn more, visit www.soa.org