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American healthcare has gone from a standard budget line item to a financial threat.
The inability to pay for health care is now disrupting the way Americans live, work and plan for the future, according to data from the West Health-Gallup Center on American Health Care. As healthcare takes up a larger share of family budgets, more people are forced to revise assumptions about when they can retire, how much they need to save, and what trade-offs they can realistically make; decisions that many households now make with a financial advisor rather than alone.
New research shows that the rising cost of care is no longer just a problem for the uninsured — it’s a crisis that affects middle- and high-income households alike.
The latest findings show that a third of Americans (about 82 million people) have cut back on basic daily expenses, such as utilities and gas, to cover medical bills.
Financial stress is widespread:
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Income is not a shield: While low-income families are hardest hit, 25% of households earning between $90,000 and $120,000 report making similar concessions. Even 11% of those earning more than $240,000 have felt the pressure.
Perhaps the most detrimental impact is on long-term financial security. Health care costs are now one of the leading reasons Americans are staying in the workforce longer than expected.
According to the study, nearly 24 million Americans (10% of adults) have postponed their retirement specifically because of health care costs. Another 18% have delayed changing jobs and 14% have postponed buying a home.
If you’re planning for retirement, you can’t rely on headline inflation numbers to project your future needs.
Here’s how to insulate your portfolio:
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Treat your HSA like a retirement account: If you have a high-deductible health plan, max out your health savings account. It offers a triple tax advantage: tax-deductible contributions, tax-free growth, and tax-free withdrawals for medical expenses.
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Factor in medical inflation: Health care costs typically rise faster than the standard consumer price index. When calculating your retirement number, create a higher inflation cushion specifically for healthcare.
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Review long-term care options: A single major health event or the need for a long-term assisted living facility can wipe out a 401(k) in a matter of months. Consider long-term care insurance or hybrid life insurance policies that include long-term care benefits.
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Discuss your transition to Medicare: Understand exactly what Medicare covers (and doesn’t). Out-of-pocket costs, supplemental plans, and Part D prescription drug coverage can still cost thousands of dollars a year.
As healthcare costs continue to rise, a successful retirement strategy should be about both managing medical risk and choosing the right investments.
For many households, that now means building explicit health care assumptions into their retirement plan, testing different cost scenarios and making adjustments to savings rates, retirement age or investment mix — work that typically benefits from professional input rather than rules of thumb.
Services like smart asset connect savers with vetted financial advisors based on location, asset level, and goals, which can make it easier to find someone who will regularly incorporate those healthcare costs into real-world plans.
For people already feeling the pressure of medical bills, SmartAsset’s free matching tool pairs users with up to three advisors for an initial conversation, at no cost and with no obligation to contract, so they can get a clearer view of whether their current plan can handle rising healthcare costs.
You can get an idea of ​​what to change now before those costs dictate your retirement timeline, not the other way around.
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This article Health Care Costs Now Americans’ Top Money Fear: Here’s How to Protect Your Retirement originally appeared on Benzinga.com
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