The health and wealth connection in retirement

Key Points

  • The decisions you make about health care, long-term care and insurance can have a dramatic effect on your financial future.
  • Although many people are worried about health care costs in retirement, few have taken action to address those costs.
  • The Ameriprise Health, Wealth and RetirementSM study provides insights into how your health will affect your finances in retirement.

Results of the Health, Wealth and Retirement study from Ameriprise Financial

How much will your health impact your financial future? Ameriprise Financial set out to determine how Baby Boomers view the impact their health will have on their finances in retirement.

"Most people surveyed recognize some connection between their health habits now and the potential for reduced health care costs in retirement," notes Pat O'Connell, Executive Vice President, Ameriprise Advisor Group. "More alarming, however, are the study results that show far fewer people are taking concrete action to save enough for what may be extremely high health care costs later in life."

Making the connection

The majority of people surveyed understand the connection between health and finances in retirement. Some examples include:

  • Making good choices today can help you stay healthy later. More than two-thirds of Boomers (79%) believe that the healthy lifestyle choices they make today could have an impact on achieving their financial goals.
  • Good health now can pay off down the line. Even more people (89%) believe that healthy lifestyle choices today will help reduce the amount of money needed for health care in retirement.
  • Learning from experience. If you've gone through a serious medical situation in your life, you may have also woken up to the connection between health and finances. The study shows that 26% of Boomers have already experienced a significant health event. Of those, 54% say that event has impacted their finances.

Taking action

Although many people worry about the high cost of health care in retirement, it can be tough to know what actions to take to prepare. That may be why study results are mixed on this subject. Many people are taking steps to take care of their health, but fewer are taking specific financial actions. Here are some insights that can help.

  • Save more. Boosting retirement account savings such as 401(k)s and IRAs can help ensure you have enough for a comfortable retirement, including covering out-of-pocket health care costs. In fact, 55% of Boomers surveyed said they are increasing their savings to help pay for health care costs.
  • Consider long-term care insurance. Long-term care is one of the most expensive health items you'll pay for in retirement. To help protect your retirement savings and avoid putting a financial burden on loved ones, you may want to consider long-term care insurance.

    These policies can help cover the costs of assisted living, home health care or a nursing home. Purchasing long-term care insurance is an action only 21% of Boomers have taken to prepare for health care costs in retirement, according to the study. Another 32% have considered buying a policy.

  • Make the most of health savings accounts. HSAs, used in conjunction with high-deductible health care insurance, allows users to save money for out-of-pocket medical expenses in tax-advantaged accounts. HSA contributions roll over from year to year and can be used as a way to save for health care costs in retirement.

    Only 17% of respondents have maximized savings in a HSA despite the fact that the majority of large companies offer some type of high-deductible health insurance option with an HSA. In addition, many companies contribute to employees' accompanying HSAs. Check your options during your open enrollment period to see if your employer will contribute to your health care savings.

Take the first step

How do your health care plans for retirement compare with the survey respondents? Are you doing all you can to prepare for medical bills in retirement?

An Ameriprise financial advisor can help. A majority (63%) of survey respondents expect help from a financial advisor when it comes to planning for health and health care costs in retirement. Contact an Ameriprise financial advisor today to discuss the financial impact your health may have on your plans for a confident retirement.

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