Will Medical Expenses in Retirement Send You to the Poor House?
A successful retirement has numerous meanings depending on personal preferences, but good health often serves as the foundation. Unfortunately, the majority of Americans have more than a few minor cracks in their retirement plans when it comes to affording medical expenses.
Saving money for health-related costs in retirement appears to be stuck in the waiting room. According to a new survey from the AARP, 55% of working Americans older than 50 believe they will not have enough money for health care as they reach retirement, and 38% say they haven’t saved anything for such expenses. While almost 70% believe they should have started saving at age 35 or younger, only 28% actually did so. Making matters worse, 44% do not have any plans to start saving in the future.
“Our survey shows that Americans haven’t planned enough for health expenses in retirement,” said AARP Vice President of Financial Security Debbie Banda in a press release. “Even though these costs can have a significant impact on retirement savings, families and individuals often struggle to save what they need because they are paying other necessary expenses or helping to support other family members or loved ones. We hope that we can help people of all ages get a better handle on these expenses with AARP’s free Health Care Costs Calculator.”
While Medicare only covers about half of health care costs, it was the most commonly reported strategy for affording medical expenses in retirement. In order to account for financial shortages, 57% of workers 50 and older plan to work past age 65, including 18% who believe they will never retire. Workers age 60 and older (24%) are more likely than workers age 50 to 59 (14%) to say they will never retire. The average retirement age is currently between 62 and 64 years old.
Working past age 65 can help improve your finances, but it’s a risky strategy, given that your future health status and job opportunities are unknown. Medical bills are such a burden to Americans that FICO, the nation’s most popular credit score provider, is changing its calculations so medical collections will have a lower impact on credit scores, making it easier for consumers to obtain loans. Earlier this year, Experian said more than 64 million Americans had a medical collection on their credit report.
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