Documenting Out-of-Pocket Expenses and Retirement Confidence

Regulation | May 02, 2018 | by Stephen Maag

Two new reports provide overviews of how confident older adults are as they approach retirement, and the out-of-pocket health care expenses they can expect to pay after age 70.

The Employee Benefit Research Institute recently issued 2 reports that document out-of-pocket health care expenses and retirement confidence among older adults.

Out-of-Pocket Expenses

Cumulative Out-of-Pocket Health Care Expenses After the Age of 70 contains both good and bad news about the actual out-of-pocket health care costs that people after the age of 70 must pay, excluding Medicare and insurance premiums.

The good news: For the majority of people surveyed, out-of-pocket expenses were lower than what is commonly believed. For those who die at age 95 or later, the median cumulative expenses were just over $27,000.

The bad news: For some, out-of-pocket expenses are catastrophic. Older adults in the 90th percentile had out-of-pocket expenses of nearly $172,000. Expenses for those in the 95th percentile were over $269,000.

Other findings include:

  • Nursing home expenses are major drivers of high out-of-pocket costs, especially for women. Half (51%) of women are likely to enter nursing homes after age 70, compared to 38% of men. The likelihood of nursing home admission increases with age.
  • Women who live longer spend more than men with similar lifespans. The 90th percentile of out-of-pocket nursing home expenses for those who die at 95 or later is $77,000 for men and $99,000 for women.
  • One in 3 people over age 70 are covered by Medicaid.
  • Longevity increases the likelihood of higher out-of-pocket expenses.

Retirement Confidence

Findings from the 2018 Retirement Confidence Survey show that two-thirds of workers felt “somewhat confident” or “confident” in their ability to live comfortably in retirement. However, the “somewhat confident” group (47%) was far larger than the “confident” group (17%). Once retired, the “very confident” group increases to 32%.

Other findings include:

  • Three-quarters (76%) of workers with defined contribution plans, including 401(k) plans, reported being confident of a comfortable retirement, compared with 46% of those without a plan.
  • Confidence in Medicare and Social Security dropped from 52% in 2017 to 46% in 2018. However, two-thirds of retirees report Social Security as a major source of income.