Sun Life Financial Survey: Vast Majority of Americans Fail to Estimate Retirement Healthcare Costs
Over 90% of Americans either have no idea how much they will spend on healthcare in retirement, or underestimate the costs; Three-fourths have no plans to meet healthcare costs
WELLESLEY, Mass. (May 4, 2011) - Sun Life Financial Inc. (NYSE:SLF, TSX:SLF) today released its latest consumer survey: Flying Blind: How Working Americans View Healthcare Costs in Retirement, a Sun Life Financial Unretirement Survey, which suggests that over nine in ten American workers either have no idea what their healthcare costs are likely to be in retirement, or underestimate those costs when compared to conservative industry estimates. Forty percent of those polled claim to have “no idea” what their retirement healthcare costs would reach, and only 8 percent estimate that their costs will reach $200,000 or more, a realistic prospect by industry experts.*
Despite this knowledge gap, the Sun Life survey found that nearly three-fourths of American workers lack plans to cover healthcare costs in retirement. That includes workers approaching age 65: Only 30% of workers in their fifties have established plans to meet future healthcare costs, and a meager 40% of workers in their sixties have adopted plans.
This lack of financial preparation spans all wealth levels. The survey found that although three quarters (75%) of American workers with more than $250,000 in assets feel some level of confidence that they can meet healthcare costs in retirement, only a quarter (26%) of those respondents have established any plan for meeting those costs.
The survey found Americans deeply pessimistic about their future ability to pay for healthcare costs in retirement, with 43% of those polled stating they feel “not at all confident” and only 9% feeling “very confident.” This sentiment pervades all ages, with half of workers in their fifties “not at all confident” in their ability to meet healthcare costs in retirement.
“People will live happier, more fulfilling lives in retirement if they can better plan for unforeseen healthcare needs,” says Janet Whitehouse, Senior Vice President and General Manager of Sun Life Financial’s Individual Life Insurance Division in the U.S. “If you take action because you’ve reasonably anticipated your future healthcare needs, your sense of wellbeing increases, and you can focus on living life to the fullest.”
On a positive note, American workers’ lack of confidence in meeting healthcare expenses in retirement is fueling a move toward healthier lifestyles. When asked if concerns over meeting future healthcare costs have prompted them to adopt a change in lifestyle (such as improved diet and exercise, quitting smoking, or reducing stress) over half of respondents (53%) reported making lifestyle changes, with 12% saying they have made “major changes.” These preventative measures transcend age groups with even 45% of thirty-somethings having made health and lifestyle changes to reduce future long-term healthcare costs. Americans with household income over $175,000 (28%) are far less likely to have made such changes than less affluent counterparts (51% for those earning $100,000-150,000).
Flying Blind: How Working Americans View Healthcare Costs in Retirement is the latest in the Sun Life Financial Unretirement Survey series, dedicated to gauging how economic, financial, and societal forces affect working Americans. The survey provides a potential “leading indicator” of future retirement decisions that will impact individuals, the government, employers and the larger economy. Along with the annual Sun Life Unretirement Index – which launched at the onset of the financial crisis in the fall of 2008 – this new study also examines the growing demographic of the Unretired in America. Unretirement is defined as working at least 20 hours per week after the age when one is eligible to receive Social Security benefits. Sun Life created this Index to learn more about the reasons why Americans are choosing to “unretire,” or continue to work full- or part-time after the age of traditional retirement.
Healthcare benefits play significant role in employment decisions for working Americans
The impact of healthcare costs on American’s financial security has also influenced their employment decisions the study found. Over 90% of those polled stated that healthcare benefits are “somewhat” or “very important” when deciding whether or not to accept a new job or position, and over half (55%) categorized healthcare benefits as “very important.” In addition, almost one-fourth (22%) of working Americans said that a company’s overall healthcare benefits has been the single deciding factor in their decision to join a new employer.
The importance of healthcare benefits in American’s employment decisions is consistently high across age ranges:
- 92% of those in their 20’s consider it important
- 90% of those in their 30’s consider it important
- 95% of those in their 40’s consider it important
- 90% of those in their 50’s consider it important
- 86% of those in their 60’s consider it important
Many working Americans have depleted savings or taken loans to cover healthcare expenses
Sun Life’s research also found that the costs of healthcare are impacting working American’s financial security long before they reach traditional retirement age. Almost one in ten of those polled has had to take money out of retirement, deplete assets, or borrow money to pay for a serious illness or medical procedure for themselves or a loved one. Of that group, over half (51%) don’t believe they will be able to replace those funds before retirement.
This online study was conducted in March of 2011 by FH Research with Knowledge Networks as the data collection partner. The research utilized the web-enabled KnowledgePanel®, a probability-based panel designed to be representative of the U.S. population. Initially, participants are chosen scientifically by a random selection of telephone numbers and residential addresses. Persons in selected households are then invited by telephone or by mail to participate in the web-enabled KnowledgePanel®. For those who agree to participate, but do not already have Internet access, Knowledge Networks provides at no cost a laptop and ISP connection. People who already have computers and Internet service are permitted to participate using their own equipment. Panelists then receive unique log-in information for accessing surveys online, and then are sent emails throughout each month inviting them to participate in research. There were a total of 1525 qualified* respondents to the survey. The margin of error is +/- 2.5 at a 95% confidence level.
For more information about this research and Sun Life’s Unretirement Index, visit: www.unretirementindex.com
About Sun Life Financial
Sun Life Financial is a leading international financial services organization providing a diverse range of protection and wealth accumulation products and services to individuals and corporate customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. In the United States and elsewhere, insurance products are offered by members of the Sun Life Financial group that are insurance companies. Sun Life Financial Inc., the holding company for the Sun Life Financial group of companies, is a public company. It is not an insurance company and does not offer insurance products for sale in the United States or elsewhere, and does not guarantee the obligations of its insurance company subsidiaries. Product offerings may not be available in all states and may vary depending on state laws and regulations.
As of December 31, 2010, the Sun Life Financial group of companies had total assets under management of U.S.$466 billion. For more information please visit www.sunlife.com/us.
Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) and Philippine (PSE) stock exchanges under the ticker symbol SLF.
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* According to a 2010 report from the Center for Retirement Research at Boston College, an average 65-year-old-couple free from chronic disease can expect to spend $260,000 on remaining lifetime healthcare costs (including nursing-home care). In addition, there is a 5% chance that those same costs could exceed $570,000.