Seniors Getting ready to Retire are Worried about Health Care Costs

May 9, 2012 Senior Financial Issues

It used to be that seniors would make it through their working-life with some degree of substantial assets and a bank account—large enough to make it through the golden years and perhaps leave something to their children.  Enter the housing-bubble, financial market and bank collapses, unaffordable health insurance and health care, the European crisis, the great recession of the last 2000s and a confluence of issues that have devastated the economy.

Many American retirees are not fully aware of the structure and additional out-of-pocket expenses of the Medicare system that is ravaging the senior community of their resources and net-worth.  Those who are aware are afraid they will lose all of their retirement savings as a result of the high patient-share of such things as, deductibles, prescription costs, co-pays and other Medicare-related patient fees that have continuously increased over the years.  A recent Harris poll released by Nationwide Financial details the fact that nearly 50% of those who have substantial savings of a quarter million dollars are worried their savings will be wiped-out by these out-of-pocket charges for their medical services.

Most retirees believe their out-of-pocket expenses for healthcare will be no more than around $5000 dollars a year.  But according to the facts released by the Nationwide poll, the real-world average out-of-pocket expenses is more than over $10,000 a year for a senior’s health-related expenses.

Many typical senior-required services such as dental, eye care and hearing aids are not covered by Medicare.  These can be very expensive issues and medical-related expenses.  Dental care alone can add-up to thousands of dollars a year as a person gets older.  Hearing aids typically run somewhere in the $5000 range.

Many pre-retirees believe that Medicare pays for long-term care expenses.  The truth of the matter is that Medicare has a very limited long-term care payment structure and in the end, an individual is responsible for their own long-term care through either long-term care insurance programs or the use of their life savings and assets.  Medicare pays only for medically-necessary skilled nursing facility or home health care for a limited period of time.

The estimates from the Medicare.gov website state that in 2012 approximately nine million individuals over the age of 65 will need to utilize long-term care. By the year 2020, 12 million seniors will need long-term care in America. For additional information on long term care, see the Medicare website at the following URL: http://www.medicare.gov/LongTermCare/Static/Home.asp.

Many workers are working longer in anticipation of higher health care costs and the possibility of the eventual need for long-term care. The talk about the Medicare system not being able to fund all of its obligations by 2024 and Social Security system in trouble by 2033 contributes to the fear-factor and is also resulting in more workers working longer to save additional assets for retirement.   In 2012, according to a Bank of America report, 57% of workers with assets of $50k to $250K are holding off on retiring due to fear over escalating healthcare costs.  This is quite an increase from 2011 where only $37 percent planned on extending their retirement.

Good retirement planning and savings schemes are critical today. It may be a good idea for individuals to hire a financial planner or make larger retirement account contributions in anticipation of the new and sobering reality of growing old in America.