According to a recent report by RBC Wealth Management, healthcare costs will be the second biggest expense for American retirees. Regrettably, many have not done anything to prepare for this reality. RBC reports that 80% of Americans are worried about healthcare expenditures, but only 56% have done anything about them. Furthermore, roughly 50% of those that are planning believe that they are undershooting the likely expenses.
It is estimated that a HEALTHY 65-year-old couple will spend more than $400,000 on their health during retirement. Counting on Medicare? Don’t. Although it will assist retirees greatly, Medicare is likely to fund less than two-thirds of the projected expenditures.
Americans do have options/ tools to help them manage healthcare costs, including Health Savings Accounts, life and disability insurance, and long-term care, but these options get much more expensive as one matures.
Regrettably, median retirement account balances are incredibly insufficient to meet general living expenses, let alone these estimated healthcare costs. According to the Economic Policy Institute, the average retirement savings of all American families is $95,776, but since many families have no savings, the median family has just $5,000 saved. The median retirement balance for families with a savings account is only $60,000.
Given the estimated health-related expenditures, it is very unlikely that current retirement savings and Social Security benefits will be sufficient to meet the needs of retirees. Then what?