The annual Mercer Workplace Survey of retirement plan participants who receive health benefits found that although folks are more optimistic about the economy, they are planning to save slightly less during the upcoming year. Interestingly, respondents over the age of 50 have lowered their savings targets most significantly, by about 18 percent.
The survey also found employees are planning on working longer. In fact, 77 percent of workers said they plan to retire at age 65 or later, up from 71 percent in 2012. Also, respondents identified the cost of health care in retirement as a major financial stress; just 35 percent believe they’ll have enough money to pay for health care in retirement.
“The worries about health care in retirement just exemplify the contradictions we see across this year’s survey results,” said Dave Tolve, Mercer’s defined contribution business leader in a company press release. “Most are worried about health care in retirement, yet most think they won’t have enough money to pay for it. The logical conclusion would be to see an increase in savings to tackle this expected problem, but our survey shows this is not the case.”
As health care costs continue to increase at twice the rate of inflation, it’s crucial to get a handle on what health care could cost you in retirement — and to save smarter. According to a 2013 Bank of America report, a moderately healthy 65-year-old paying about $5,000 a year for health care today, could pay close to $10,000 a year at age 75 and nearly $25,000 a year by the time he or she reaches age 89.
In addition to contributing all you can to your 401(k) and taking advantage of the catch up provision if you are over age 50, consider choosing a high deductible health plan with a Health Savings Account (HSA) if your company offers that option. And, if you’ve finished paying for college, consider directing those funds to pad your retirement nest egg.