Healthcare is Broken

While only 16% of workers say they feel “not at all confident” about being able to pay for basic expenses in retirement, a significantly greater number of individuals doubt their ability to afford retirement medical expenses (29%) and especially long-term care costs (39%).  There are good reasons to be worried.  Several recent studies have calculated that a 65-year-old couple retiring in 2012 would need nearly a quarter of a million dollars to pay for out of pocket medical costs throughout retirement.  Neither of these estimates includes long-term care expenses.

These healthcare issues become more salient as time passes for each of us.  Health expenses increase steadily with age.  In 2011, households with at least one member between ages 50 and 64 spent 8% percent of their total budget on health items, compared with 19% for those age 85 or over.  Health-related expenses occupy the second-largest share of total expenditure for those ages 75 or older (after housing).  The two components of household expenditures that show a declining pattern across age groups are transportation expenses and entertainment expenses.  Food and clothing expenses (as a share of total expenditure) remain more or less flat across the different age groups.  There is a large increase in spending at the 95th percentile for those ages 90 or older, which can be attributed to very high health care expenses.


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