It’s not just a lack of financial preparation — and the negative effects of the recession — that’s causing an increasing number of workers to push back their retirement. Health insurance concerns play a pivotal role, as well.
More than half (53%) of workers 21 and older said they plan on retiring later than they originally planned in order to continue receiving employer-sponsored healthcare coverage, according to a report by the Employee Benefit Research Institute (EBRI).
The EBRI study also found that if health care benefits were guaranteed in retirement, 27% of employees said they’d actually retire earlier than they originally planned, which is up from the 15% who said they’d retire earlier in 2003 under the same conditions.
In addition to EBRI’s research, a report by The Wall Street Journal found that nearly two-thirds of individuals between the ages of 45 and 60 are currently planning to push back their retirement date.
Plus, there’s no shortage of research on just how woefully under-prepared a significant portion of employees are for retirement.
Eye-opening cost of retiree health care
So, is sticking with an employer simply for health care coverage a sound strategy for seniors? If they don’t mind working, absolutely.
When it comes to total spending for older individuals, health care costs take up a huge chuck of their budgets. According to EBRI:
- For individuals age 50 to 64, health care costs account for 9% of total spending
- For those age 50 to 64, it’s 12%, and
- For individuals age 75-84, it’s 15% of total spending.
While Medicare definitely helps with this spending, most still pay a sizeable amount for health care. In fact, according to EBRI, just 59% of total health-care costs for Medicare recipients are completely covered.
The rest if paid by either supplementary insurance policies, or it comes straight out of pocket.
To drive home just how much health costs will affect retirees, here’s an example from Paul Fronstin, the director of the health research program at EBRI: To have a good shot at covering all of their health expenses, the average 65-year-old couple will need to have saved between $163,000 and $283,000.