When it comes to health care costs both younger and older adults are concerned over costs right now as well as in the future. New survey data from the Nationwide Retirement Institute® reveals 63% of younger adults believe their health today will impact how much they need to save for retirement, and 69% of older adults note that one of their top fears in retirement is their health care costs going out of control.
"Health care costs and related financial concerns are a common thread across multiple generations," said John Carter, president of Nationwide Retirement Plans and president and chief operating officer-elect of Nationwide Financial. "In fact, our data illustrates a nearly universal truth when it comes to health care costs: these concerns last a lifetime. Although young and old agree they should be more proactive in addressing these concerns, they are missing easy opportunities to do so."
Prioritizing preventative care, taking advantage of an HSA, participating in employer programs or working with a financial advisor are relatively low-cost, easy actions consumers can take to help lessen the burden of health care costs in and out of retirement.
The findings were gathered from surveys conducted online by Edelman Intelligence among 1,000 U.S. adults ages 25 through 45, or "younger adults"; and by The Harris Poll among 1,462 U.S. adults ages 50 or older with investable assets of $50K or more who are retired or plan to retire in the next 10 years, or "older adults."
Despite 58% of older adults being terrified of what health care costs may do to their retirement plans and 67% being most stressed about an unanticipated decline in health, this concern isn't necessarily translating into adults taking actions to prioritize health care and financial wellness today. Many older adults also have regrets about their actions over the years, with almost half of those who are retired (46%) reporting they would save more in their retirement accounts if they could plan for retirement over again.
Financial stress is making people sick, among other negative impacts
Financial matters are making people sick, and the king of all financial worries over a lifetime is health care. In fact, three in four younger adults have had negative experiences resulting from financial stress. According to the survey, younger adults shared that financial stress had a negative impact on their overall health (39%); harmed their relationship with their spouse or significant other (35%); hurt relationships with friends (26%); hurt their performance at work (26%) and hurt their attendance at work (21%).
Although many younger adults cited concerns over current and future health care costs, many are avoiding health care now because of expenses. In fact, health care expenses can impact people so greatly that they skip getting care, go into debt and restrict themselves from saving.
In addition, almost three in four younger adults have taken "risky" actions to save money on medical related expenses, including: delayed seeking medical help with the hopes the condition will subside (33%); considered not seeking care to avoid high deductibles (27%); skipped a scheduled appointment to avoid a medical bill (22%); took less than the recommended dosage to extend the length of a prescription (22%); stopped taking a prescription because it cost too much (21%); and did not follow treatment plan recommended by doctor (physical therapy, etc.) (20%).
What's more, health care expenses can have a taxing effect. One in five (20%) younger adults report health care expenses have had extreme impact on their well-being, causing them to skip getting care (48%), go into debt (38%), stop saving money for discretionary purchases (43%), kept them from getting needed medicine (33%), made it harder to contribute as much as they would like to a 401(k) retirement account (31%) or caused them to file for bankruptcy (13%).
"The financial barriers to affording health care can be overwhelming; however, many adults don't realize there are a number of ways to lessen the financial burden," said Carter. "In fact, there are tools, employer programs and resources that can help consumers prioritize their health, remove cost barriers and best provide insight into how to address concerns."
Opportunities to do more
Younger adults are eager to do more to prioritize their health and be financially prepared for health care costs. In fact, 69% agree prioritizing self-care and mental health will help them save on health care expenses in the distant future and would like to do more to prioritize their health. However, many today are not prioritizing their health. One in three younger adults admit health and wellness are not a top priority for them, and 40% admit they do not get preventative care today to prioritize their health in the future.
Interestingly, younger adults realize the importance of prioritizing their health now yet are not acting: 50% say 10-15 years from now they will wish they had taken better care of their health.
The good news is there are many low cost, high-impact practices consumers can follow to help achieve their goals of staying healthy today and wealthy tomorrow.
"There's a disconnect among younger adults when it comes to the idea of prioritizing self-care and mental health versus the actions being taken," said Kristi Rodriguez, leader of the Nationwide Retirement Institute. "Many understand these should be a main concern, but too few realize there are simple ways to mitigate potential health care costs both today and tomorrow that are already afforded to them through their employer."
Prioritizing preventative care
Taking advantage of preventative care is a way for adults to help ensure they are in good health. In fact, the Affordable Care Act (ACA) features a provision that requires private insurance plans to cover recommended preventive services without any patient cost-sharing, in an effort to improve health and remove cost barriers. However, only half of younger adults have had a physical or well-check (50%) and less than that (45%) have had preventive screening such as blood pressure, cholesterol or body mass index in the past year. In addition, nearly two in three have not had a flu shot or other immunization in the past year.
Many younger adults can't provide a good reason why they don't get preventative care (31%), while others indicate cost (22%) and time (18%) remain as barriers.
"Making preventative care a priority is one of the easiest ways adults can lessen concerns about their own health-related costs," said Rodriguez. "The benefits of taking advantage of available preventive services can have a positive financial impact for the short- and long-term."
Taking advantage of an HSA
Both younger and older adults lack understanding of the advantages an HSA can provide them from a tax perspective and as a retirement savings tool. In fact, only 17% of younger adults use an HSA and of those who have one, 25% use it to pay only for today's health care expenses (rather than saving those funds as a tax-free way to cover health care costs in retirement).
Similarly, 43% of older adults do not know the advantages of an HSA. Only two in five (42%) know that HSA contributions or funds drawn to pay for qualified expenses are not taxed* and of older employed adults who contribute to their HSA offered by their employer, more than half (52%) use it to pay for today's health care expenses only.
"Nationwide Retirement Institute's annual health care consumer survey sheds light on the trends and challenges adults face when planning for health care costs leading up to and in retirement," continued Rodriguez. "An HSA is an effective tool for supplementing retirement savings, while also offering tax benefits. There is a clear opportunity for further education around and greater adoption of HSAs among younger and older adults."
Participating in employer programs
The number one financial concern of younger adults is not having the money to cover unplanned medical expenses; however, fewer than half of younger adults have started saving through a 401(k) or IRA (44%), and the majority of those saving for retirement contribute 10% or less (57%).
In addition, while only 29% of younger adults say they have access to wellness programs from their employer, only 17% of those participate in those programs. Taking advantage of wellness programs can help adults prioritize health and wellness.
Working with a financial advisor
Even though many older adults are concerned and stressed about health care costs, many are not having informed discussions with professionals on how to prepare. In fact, only one in three older adults plan on discussing health care costs during retirement (33%) or long-term care costs (32%) with a financial advisor or consultant. It is important that consumers work with advisors to adequately plan for health care costs both in and out of retirement.
"Health and wealth are highly personal and complex topics, and it's easy to be overwhelmed when trying to prepare oneself for today and tomorrow," Carter said. "Working with an advisor and taking advantage of online tools, in preparation for retirement, can help adults both young and old reach personal goals and achieve the retirement they envisioned."
To help advisors have these conversations, Nationwide's Health Care Cost Assessment tool uses proprietary health risk analysis and updated actuarial cost data such as personal health and lifestyle information, health care costs, and medical coverage. It provides a meaningful, personalized cost estimate that will help advisors and clients estimate future medical and long-term care expenses.
To learn more about the 2019 Nationwide Retirement Institute Health Care Costs in Retirement consumer surveys, visit www.nationwide.com/healthcareinsights and advisors can visit www.nationwidefinancial.com/healthcareinsights
About the surveys
The Edelman Intelligence survey was conducted online on behalf of The Nationwide Retirement Institute between July 9 and July 13, 2019 among 1,000 U.S. adults between the ages of 25 and 45 years old.
The Harris Poll was conducted online on behalf of The Nationwide Retirement Institute between March 25 and April 10, 2019 among 1,462 U.S. adults age 50 or older with investable assets of $50K or more.
For both surveys, data are weighted where necessary by age by gender, race/ethnicity, region, education, income, marital status, and propensity to be online to bring them in line with their actual proportions in the population. Because the sample is based on those who were invited to participate in the panel (and not random), we cannot calculate estimates of theoretical sampling error.
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*HSAs are not taxed at a federal income tax level when used appropriately for qualified medical expenses. Also, most states, but not all, recognize HSA funds as tax-free. Please consult a tax advisor regarding your state's specific rules.
This material is not a recommendation to buy, sell, hold, or rollover 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 work with their financial professional to discuss their specific situation.
This information is general in nature and is not intended to be tax, legal, accounting or other professional advice. The information provided is based on current laws, which are subject to change at any time, and has not been endorsed by any government agency.
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