Study: Nearly Half of Soon-to-be-Retired, High-Net-Worth Americans “Terrified” of Health Care Costs in Retirement

Despite concern, few are discussing their fears with financial advisors

COLUMBUS, Ohio--(BUSINESS WIRE)-- A new Nationwide Financial survey finds nearly half of soon-to-be-retired, high-net-worth Americans say they are “terrified” of what health care costs may do to their retirement plans, and nearly three in four say health care costs going out of control is among their top retirement fears.

However, according to the survey conducted by Harris Interactive released today of 1,250 Americans with at least $250,000 in household assets – including 625 who plan to retire by 2020 – 38 percent of those nearing retirement say they have not discussed their retirement at all with a financial advisor. Of those who have, only one in five discussed health care costs in retirement not covered by Medicare.

“Americans – even those who have diligently saved for their golden years – are not prepared for the reality of health care costs in retirement and don’t really understand how Medicare works,” said John Carter, president of Nationwide Financial Distributors, Inc. “Too many assume their employers will continue to pay their premiums during retirement or Medicare will cover all health care expenses.”

It appears that soon-to-be-retirees lack confidence in the ability of financial advisors to help with this challenge, with three in five (59 percent) saying most financial advisors are not equipped to discuss retirement health care costs with their clients. However, this lack of confidence may be unfounded. Those who have broached this topic with a financial advisor indicated that it was worthwhile, with two-thirds saying advisors were helpful or very helpful in discussing information about their health and estimating their health care costs in retirement.

“Advisors who can drive a conversation about this challenging subject will have a leg up on the competition and a great opportunity to build stronger relationships,” Carter said.

Understanding Medicare

Only one in five surveyed say they are confident in their knowledge of Medicare coverage, and more than half say it is very, to extremely, important they educate themselves on Medicare coverage when planning for retirement.

Soon to be retired Americans who plan to enroll in Medicare estimated that Medicare will pay for 68 percent of their health care costs in retirement. But when asked how they arrived at that percentage, nearly three in four guessed or didn’t know, 15 percent calculated it based on their own research, seven percent spoke with friends who have already retired and just four percent say they were told by their financial advisor.

Medicare provides health coverage to 46 million older or disabled Americans, 1 but according to the Employee Benefit Research Institute, Medicare currently covers only about 51 percent of the expenses associated with health care services. 2

“Retirees’ access to employer-sponsored health insurance continues to decline, and there are potential changes in Medicare benefits due to the program’s projected funding shortfall,” Carter said. “Americans need to realistically plan to be responsible for their own health care in retirement.”

Most underestimate or just don’t know

While 45 percent expect health care to be their biggest expense throughout retirement, when asked to estimate how much they anticipate spending each year on health care, they said, on average, $5,621. This represents a drastic underestimation based on a 2010 study that estimates out-of-pocket health care expenses for a 65-year-old couple retiring today and living for 20 years to range from $250,000 to $430,000.3 That could mean as much as $10,750 a year per person in out-of-pocket health care expenses.

“One reason people may underestimate the amount of money needed to cover their health care costs in retirement is that many workers do not think they will ever need long term care,” said Kevin McGarry, director of the Nationwide Institute for Retirement Income. “But studies have found that 30 to 40 percent of those reaching age 65 will use nursing home care at some point. Americans also mistakenly believe that Medicare covers long term care – it does not.”

Earn loyalty

The survey also revealed an opportunity for advisors: 43 percent of soon-to-be-retired Americans say they plan to discuss health care costs with a financial advisor.

While only one in 10 (12 percent) of soon-to-be-retired Americans say they are planning to switch financial advisors, of those, more than half (54 percent) say they would be more likely to stay with their current advisor if they could help them plan for covering health care costs in retirement or discuss the role of Medicare in their retirement.

“The good news is that consumers want help; presenting a big opportunity for advisors to step up in terms of education and preparedness in helping clients plan for health care in retirement,” McGarry said.

To better assist advisors in helping clients plan for health care-related retirement expenses, Nationwide Financial launched the Personal Health Care Assessment program to help advisors estimate their clients’ health care expenses in retirement. Developed by leading physicians and experienced actuaries, the program uses proprietary health risk analysis and up-to-date actuarial cost data such as personal health and lifestyle information, health care costs, actuarial data and medical coverage to provide a meaningful, personalized cost estimate that will help clients plan for medical expenses.


Data was collected via an online survey by Harris Interactive on behalf of Nationwide from Jan. 3-19, 2012. The survey was among 625 adults ages 55+ having $250,000 or more in household assets who plan to retire by 2020 and 625 retired adults ages 65+ having $250,000 or more in household assets. Results were weighted as needed for age, sex, race/ethnicity, education, region, household income and investable assets. Propensity score weighting was also used to adjust for respondents’ propensity to be online. To see the entire survey, visit

About Nationwide

Nationwide Mutual Insurance Company, based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the U.S. and is rated A+ by both A.M. Best and Standard & Poor’s. The company provides customers a full range of insurance and financial services, including auto insurance, motorcycle, boat, homeowners, pet, life insurance, farm, commercial insurance, annuities, mortgages, mutual funds, pensions, long-term savings plans and specialty health services. For more information, visit

Life insurance is issued by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, Columbus, Ohio.

Nationwide, Nationwide Financial, the Nationwide framemark, Nationwide YourLife and On Your Side are service marks of Nationwide Mutual Insurance Company.

1 Congressional Budget Office, 2010 Spending Outlook

2 Fronstin, Paul. "Savings Needed to Fund Health Insurance and Health Care Expenses in Retirement: Findings from a Simulation Model | EBRI." Employee Benefit Research Institute | EBRI. May 2008.

3 Fidelity Consulting Services, 2010. Based on a hypothetical couple retiring in 2010, 65 years or older with average (82 male, 85 female) and longer (92 male, 94 female) life expectancies. Estimates are calculated for “average” Retirees, but may be more or less depending on actual health status, area, and longevity.

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Charley Gillespie, 614-249-5701
[email protected]

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