Although women typically spend more years living in retirement, they tend to underestimate the costs of their future healthcare needs in their financial planning, according to a survey by Nationwide Financial.
Both men and women’s expectations fell short of what their future needs will likely be.
The survey polled 1,250 Americans with at least $250,000 in household assets. Women close to retirement estimated they would spend $4,624 each year on health care beyond what Medicare covers.
This is 21 percent less than the $5,882 men nearing retirement estimate they will spend each year on things like premiums, co-payments and deductibles. This contrasts with a 2012 study that found a 65-year-old couple retiring today would need $240,000 to cover medical expenses during their retirement years and this does not include long-term care costs.
“The fact is women live longer than men, which means they will spend more time in retirement and that places women at a greater risk of outliving their retirement assets,” John Carter, president of sales and distribution for Nationwide Financial, said in a statement. “It also may increase their chances of incurring long-term care costs during their golden years. That’s why it’s especially important for women to plan for health care costs in retirement.”
According to the survey, nearly half of both women and men said they were “terrified” of what health care costs may do to their retirement plans. Women respondents nearing retirement were much more likely than men to said they have not estimated key factors such as:
• How much they will spend each year in retirement on things like premiums, co-payments and deductibles (41 percent vs. 27 percent men).
• How much income in retirement they will have from things like social security, retirement accounts or pensions (21 percent vs. 12 percent men).
On average, women estimated that Medicare would cover 65 percent of their annual health care costs. In a response that closely matches that of men, 85 percent of women said they either didn’t know how they arrived at that figure or had guessed. Only 2 percent said they were told this by a financial advisor.
Women were also slightly more likely than men to said they are somewhat unconfident to not at all confident in their plan to live comfortably in their retirement years (46 percent vs. 39 percent men).
Opportunity for advisors
While 65 percent of women have discussed their retirement with a financial advisor – of those who have, only one in 10 talked about how much they should expect to pay in health care costs apart from Medicare (compared to one in four men).
Of those who have discussed retirement with a financial advisor, 77 percent of women said they were helpful to very helpful estimating health care costs in retirement (63 percent men) and a whopping 86 percent said they were helpful to very helpful discussing the role Medicare will play in their retirement (52 percent men).
According to the survey, more than half (56 percent) of women said it is very to extremely important they educate themselves on Medicare when planning for retirement and 43 percent of women said they plan to discuss health care costs beyond those covered by Medicare with their financial advisor.
“The good news is women want to have these discussions and financial advisors can play a major role in helping women plan for and live in retirement by discussing the role Medicare will play in their retirement and helping them estimate health care costs in retirement,” Carter said.
Challenges women face in retirement
Women live an average of five years more than men and are 10 times as likely to reach age 85. While they’ve gained ground in the workplace they still earn less than their male counterparts.
According to 2010 Census Bureau statistics, women make on average 77 cents to every dollar a man makes.
It’s also estimated that 75 percent of unpaid caretakers in the U.S. are women. If a spouse is not available, the caretaker usually becomes the daughter or daughter-in-law.
According to the Women’s Institute for a Secure Retirement, women typically work 12 years less than men over their lifetime to care for children and other family members.
“While out of the workforce, women are not able to build their pension benefits, pay into Social Security or contribute money to an employer’s 401(k) or other retirement plans, all of which can negatively affect retirement savings and income,” Shawn Britt, director of the advanced consulting group for Nationwide Financial, said in a statement.
The sacrifice women make for their families at the expense of their health and finances does not come cheap. A survey by AARP reports more than 60 percent of female caregivers made career sacrifices that included cutting work hours, passing up promotions or quitting their job entirely to accommodate their care giving responsibilities.
“Women need to understand the risk they face when being thrust into the role of a caregiver, the cared-for, or both,” Britt said. “This risk can take a physical and mental toll and also have a catastrophic financial impact. Families need to be aware of what they will face if they do not plan ahead for this risk both emotionally and financially.”
Women also face challenges as the one left behind and most likely to need care. For women age 75 or older, there is approximately a 70 percent chance she will be widowed, divorced or never married while only 30 percent of men are alone for those reasons.
“This not only leaves a woman without a spouse to care for her, but may leave her more dependent on family members both financially and to provide care,” Britt said.
Women also represent 75 percent of residents in assisted living communities and 80 percent of nursing home residents.
