Health care costs pose the biggest threat to retirement security, followed by a reduction in Medicare benefits, according to retired investors surveyed by Millionaire Corner in December.
We asked more than 1,100 investors, “What do you see as major threats to your current or future retirement?” Close to three-fourths of retirees indicated health care costs and more than half cited Medicare cuts. Less than 40 percent of working Americans expressed concerns over Medicare benefits, but 73 percent, perceived health care costs as a financial concern.
Health care costs continue to strain American families, according to a December 2012 report from the Commonwealth Fund, which found that health insurance premiums increased 62 percent between 2003 and 2011, and deductibles more than doubled. At the same time, health care spending increased tenfold from 1980 to 2010, rising from $256 billion to close to $2.6 trillion, according to a briefing from KaiserEDU.org.
Medical debt is a factor in 62 percent of personal bankruptcy filings, according to an October article from Lawyers.com. Nearly three-fourths of these cases involve individuals covered by health insurance. Many are middle class homeowners. According to the website, “Many American families are just one serious illness or injury away from bankruptcy.”
The future of Medicare, a public insurance program for Americans ages 65 and older, depends on the political will of legislators grappling with tax increases and spending cuts in the face of a $16.4 trillion deficit. According to The New York Times, Republications propose raising the age Americans become eligible for health care, and both sides are discussing an increase in premiums for higher-income Americans. Hospitals and providers may also see a cut in their Medicare reimbursements.
The threat of rising health care costs is prompting more than one-third of retired investors (36 percent) to save more and more than one-fourth (26 percent) to reduce debt. About one-in-five plans to save money in a federally insured bank account and a similar share plans to purchase an annuity product. Municipal bonds are attractive to about 18 percent of retired investors.
Retired investors also express significant levels of concern over a cut to Social Security benefits (47 percent), inflation (46 percent), the performance of their investments (45 percent) and taxes (44 percent).