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Americans Aren't Ready for Retirement Healthcare Costs

By Alex Padalka February 28, 2018

Healthcare costs will be the second biggest expense for American retirees, but many have done close to nothing to prepare for them -- despite a majority of Americans worrying about having enough to pay for healthcare, according to a recent report from RBC Wealth Management.

Eighty percent of Americans are worried about healthcare costs but just 56% have factored them into their retirement planning — and among those who have, about half believe they’re underestimating those costs, according to RBC’s survey of 1,002 Americans aged 50 and over. A healthy 65-year-old couple, meanwhile, will spend over $400,000 on retirement-age healthcare, Angie O’Leary, head of wealth planning at RBC Wealth Management-U.S., says in the press release accompanying the survey. Healthcare costs have skyrocketed in recent years, as have insurance premiums, deductibles and co-pays, according to the report. Meanwhile, Medicare would cover less than two-thirds of healthcare expenditures during retirement, and someone hoping to use their Social Security benefit to cover health care costs should realize that they would eat up 59% of their benefits, RBC says.

Financial advisors can help their clients be better prepared for these expenses. Americans have various tools at their disposal already to help them manage healthcare costs, from Health Savings Accounts to life and disability insurance and long-term care, RBC says.

But pre-retirees and their advisors will need to consider the life expectancy and expected start of their retirement, the effects of gender on costs of healthcare, and the possibility of serious outlays for expensive procedures such as joint replacement or cataract surgery, according to the report.