Americans ‘dangerously’ underestimate healthcare costs, challenges in retirement planning

Author: Kimberly Bonvissuto

Date: 9/21/2023

View article on McKnights Senior Living

Americans “dangerously” underestimate the effects that healthcare costs and challenges may have on their retirement plans, including planning for a stay in a long-term care facility, according to the results of a new survey.

In its 2023 Protected Retirement Income and Planning Study, released Tuesday, the Alliance for Lifetime Income examined the connections between physical and financial health while planning for and living in retirement.

According to the National Council on Aging, today’s 65-year-olds can expect to live at least another 20 years. But almost 95% of older adults have at least one chronic condition, such as heart disease, diabetes, arthritis or Alzheimer’s.

Although 11% of Americans aged 65 or more years have Alzheimer’s, and up to 18% of people aged 60 or more years live with mild cognitive impairment, according to the Alzheimer’s Association. Older adults with dementia exhibit financial symptoms up to six years before diagnosis, with payment delinquency often the first sign for many people, according to the Johns Hopkins Bloomberg School of Public Health.

With the cost of senior living and care rising, many individuals nearing retirement or already retired either don’t think they will need long-term care or failed to plan for an unexpected health issue that could make a move into a community necessary, according to the report.

The US Department of Health and Human Services estimates that 70% of people turning 65 are expected to need two to four years of long-term services and supports, on average, with 20% of people expected to need support for more than five years. According to Today’s Homeowner, 89% of adults aged 55 or more years want to age in place, and only 34% believe they will be able to prepare their home to support their future health issues.

“It is incredibly hard for people to wrap their heads around what could happen to their health 10, 20 or more years into retirement,” ALI CEO Jean Statler said in a statement. “From cognitive decline to medical emergencies, we can all benefit from putting our financial decision-making on autopilot as much as possible.”

The good news, according to the report, is that 51% of surveyed financial professionals said that more clients are asking questions about healthcare, Medicare and long-term care. But only 8% of soon-to-be-retired or retired consumers who worked with a financial planner said that their financial professional regularly talks with them about the possibility of cognitive decline.

“Financial professionals should discuss health, including cognitive decline, and the important role that protected income can play to help manage the various health-related risks peak 65ers could face in retirement,” Statler said.

The online survey was conducted in February and March among 2,507 adults aged 45 to 75. The study also included 519 financial professionals who conduct retirement planning for individuals.