Health care costs: What most retired (and near-retirement) workers worry about

A new study has found that the cost of health care is the No. #1 financial concern for retired Americans. The report from eHealth is based on a survey of Americans age 60 through 70, including both retired workers and those close to retirement.

The research looked closely at Medicare options for seniors and how those who are retired or near retirement are thinking about that program. Experts with eHealth and Retirable, which also sponsored the survey, said that Medicare recipients often seek out the lowest premiums, but that they should be aware of possible health care needs and think about out-of-pocket costs as well.

“Selecting the right Medicare health plan for your personal needs and budget is an incredibly important financial consideration in retirement,” said eHealth CEO Fran Soistman. “Affordable premiums are key, but it’s also important to look beyond premiums. By choosing a Medicare insurance plan that properly aligns with your personal health care needs, you can minimize or avoid unnecessary out-of-pocket costs.”

Worrying about paying health care bills

Retired Americans, or those close to retirement, have a lot of concerns about the costs of health care they will be facing. The study found that 63% of those surveyed cited health care costs as a top worry in retirement, followed by running out of money (58%) and inflation (53%). In addition, those concerns seem likely to have an effect on lifestyle options for seniors:  55% say concerns about health care costs cause them to spend less in non-medical areas than they would otherwise. At the same time, only 33% of those currently retired said they saved any money specifically for health care costs in retirement. In what may be a sign that current efforts to plan for retirement are not as effective as they should be, those who are retired were considerably more likely to think they would not have enough money to get through retirement (42%) than were those who had not yet retired (29%).

One of the problems is debt: 46% of respondents reported having non-mortgage debt; among those, nearly 80% were in debt $5,000 or more.

Employers should promote basic tools for savings

Experts say that informing workers about retirement savings options and encouraging the use of retirement advisors can go a long way toward helping employees be in a better financial position for retirement. Basic tools such as 401(k) plans can help, and good resources to help with choosing Medicare plans are another strategy.

According to Tyler End, CEO of Retirable, it’s tough to pin down exactly why people are not saving more for retirement, but he noted that the problem has seemed to grow in recent decades. “Employees used to have access to more defined-benefit options including pensions and retiree health benefits—alongside Social Security benefits,” he said. “However, with the growth of 401(k) plans and other defined-contribution plans, there is less support for new retirees. Compounding that with macroeconomic factors and a lack of access to professional financial advice due to restrictive investment minimums, you can see how people are struggling to save for retirement in this current climate.”

Related: 401(k) and HSA: The perfect retirement power couple/?

One strategy for looming health care costs is taking advantage of Health Savings Plans (HSAs), which allow employees to save for future medical expenses, even past retirement. Bob Rees, senior vice president of Medicare for eHealth, noted that workers can save $4,150 for individuals and twice that for married, and those 55 and older can save another 1,000 per year. The strategy may not be for everyone, he noted, but for those who don’t have chronic medical conditions, and low costs for drugs or other medical expenses, it can help.

“The money saved in the account is yours to keep, and although you can no longer add to it when you’re no longer enrolled in a qualifying health plan, you can use the money as a tax-advantaged savings account to pay for a broad range of qualified medical expenses now and in retirement,” Rees said.