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Health care costs in retirement

For decades, financial professionals focused on accumulating client wealth for retirement through a series of diversified investments.

Because many Americans enjoyed stable pensions and supplemental health coverage through retirement, their transition from employer-sponsored programs to Medicare was relatively seamless — and inexpensive.

Unfortunately, this is no longer the case.

To maintain a level of coverage similar to that enjoyed during their working years, retirees can sign up for Medicare Parts A, B, D and a supplemental policy. Although Part A is free in retirement for most Americans, premiums, co-pays and deductibles are attached to the remaining components. This means your retired clients are responsible for a portion of their health care coverage. Medicare does not cover vision, hearing and dental, nor does it cover additional costs such as Medicare means-testing surcharges and long-term care1.

Today, baby boomers are retiring at a rate of 10,000 per day2, and health care costs — including those related to Medicare — continue to increase. Not only will individuals pay more money for fewer services, but they may also need to purchase supplemental insurance to fill in the gaps. Financial- and health-related stability in retirement — a luxury most Americans enjoyed over the past five decades — is being replaced with a universal obligation for all clients to consider health care costs as an integral part of retirement planning.

What’s behind rising costs?

The good news: Americans are starting to pay attention to this critical issue.

According to Nationwide’s 2018 “Health Care and Long-Term Care Consumer Survey” — conducted by Harris Poll and including 1,007 U.S. adults age 50 or older with a household income of $150,000 or more and 522 U.S. adults age 50 or older who are caregivers — 73 percent of respondents admitted that one of their top concerns in retirement is out-of-control health care costs. Sixty percent are worried medical expenses may negatively impact their retirement plans.3

Current data suggest these concerns are well founded, and the greatest contributing factor is retirement health care inflation, projected to grow by almost 5.5 percent over the next several years.1 This figure is more than double the average Social Security Cost of Living Adjustment (COLA) estimates of 2.6% for the foreseeable future.4

Longevity is another variable that will directly impact future health care costs.

Consider: Americans who live longer require more medical services, and costs grow significantly in the final two years of life. Recent data show that an average 55-year-old couple living two years beyond their average life expectancy will incur an additional $156,000 in total retirement health care costs (future value).5

The outlook is more challenging for women who are, on average, two years younger than their spouse, have longer life expectancies — also by two years — and will face higher lifetime expenses without income from their spouse.6

These projections may have significant consequences for individuals living on a fixed budget.

Adopting new plans

As more tangible health care data continue to emerge, some progressive financial services firms are now integrating health care costs into the retirement planning process. Nationwide’s personalized Health Care Cost Assessment projects out-of-pocket health care costs — such as Medicare premiums, deductibles, co-insurance and other expenses — specific to each client’s gender, health status and family history. Nationwide also offers annuity holders access to exclusive benefits such as Care Concierge, a service designed to help retirees and their families clarify Medicare, find the appropriate medical care or eldercare services, explain complex medical conditions and resolve medical insurance claims.7

Meanwhile, self-insured companies looking to reduce health-related expenditures are turning to wellness programs, including some with added financial incentives, to help improve the health and productivity of employees who will be the retirees of tomorrow. Workers can dedicate the health-related savings to long-term investment vehicles that may generate additional retirement income.

Looking ahead, it’s likely many retirees will be challenged to afford quality health care. But acknowledging that health care is one of the largest retirement expenses, providing accurate and personalized cost projections based on each person’s health status, and identifying solutions that meet the needs of individual clients are crucial first steps to providing a comprehensive retirement plan.


  • 1

    “2017 Retirement Health Care Costs Data Report,” HealthView Services (June 2017).


  • 2

    “9 Baby-Boomer Statistics That Will Blow You Away,” The Motley Fool (July 29, 2017).


  • 3

    Health Care and Long-Term Care Consumer Survey,” a survey of affluent U.S. adults age 50 and up with annual household income of

    $150,000 or more, conducted by Harris Poll for Nationwide (February 2018).

  • 4

    “The 2018 OASDI Trustees Report,” Social Security Administration (June 5, 2018). (

  • 5

    Data provided by HealthView Services (May 2018). Assumes couple has Medicare Parts A, B and D and supplemental insurance.

  • 6

    Data provided by HealthView Services (May 2018).

  • 7

    Nationwide Care Concierge gives you access to Health Advocate which provides guidance on many of the complex questions and issues that can come up in retirement, including: finding the right medical care, clarifying Medicare, providing licensed professional counselors, helping with travel and event bookings, resolving medical insurance claims, explaining complex medical conditions, locating elder care services and offering access to an attorney network.

  • Disclosures

    • Not a deposit • Not FDIC or NCUSIF insured • Not guaranteed by the institution • Not insured by any federal government agency • May lose value

    Federal income tax laws are complex and subject to change. The information in this memorandum is based on current interpretations of the law and is not guaranteed. Neither Nationwide nor its employees, agents, brokers or registered representatives give legal or tax advice.

    This material is not a recommendation to buy, sell, hold or roll over any asset, adopt an investment strategy, retain a specific investment manager or use a particular account type. It does not take into account the specific investment objectives, tax and financial condition or particular needs of any specific person. Investors should discuss their specific situation with their financial professional.

    Investing involves market risk, including the possible loss of principal.

    Before investing, have your clients consider vehicle and investment objectives, risks, charges, and expenses.

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