Many Americans Unprepared for the Cost of Health Care in Retirement

The rising cost of health care has been a political hot button issue for years, and Franklin Templeton’s 2019 “Retirement Income Strategies and Expectations (RISE)” survey revealed it remains a top concern today. Franklin Templeton Defined Contribution Head of Strategic Accounts Kevin Murphy and Michael Doshier, vice president, Retirement Marketing, offer some highlights from the survey and stress the importance of saving enough to meet future health care needs in retirement.

For many individuals, retirement is a time to look forward to. But for those who aren’t adequately prepared, it can come with a lot of stress—particularly if unforeseen medical expenses take a toll.

It is not much of a surprise that, like last year, Franklin Templeton’s 2019 Retirement Income Strategies and Expectations (RISE) survey revealed health care issues are the number one retirement-related concern for adults over 65 years old (36%) and running out of money came next (16%).

However, the survey also highlighted how saving early for health care expenses can better position individuals to achieve their retirement goals and examined a variety of perceptions and concerns about retirement saving strategies.

Health-Related Worries Are Top Concern

The RISE survey revealed paying for health expenses in retirement is the top expense concern among Americans (41%) regardless of age, a far greater concern than paying off debt (16%). And while Americans are apparently concerned about paying for health expenses, almost half (48%) of the survey respondents said they didn’t know how they would pay for their health care costs in retirement.

In light of these findings, we believe it’s imperative to incorporate health care expense planning as part of a holistic retirement savings strategy. Rising health care costs for employers and employees alike have spawned solutions to better equip individuals to manage their health-related expenses. One strategy which can complement long-term retirement savings strategies is a Health Savings Account (HSA).

HSAs allow individuals covered by high-deductible health plans (HDHPs) to receive tax-preferred treatment of money they have saved for medical expenses. Along with traditional health care plans, HDHPs can provide greater upfront savings to the employer than traditional plans, and significantly lower premiums for individuals. As the name implies, an HDHP has a higher deductible than a traditional health insurance plan.