Understanding And Improving Financial Literacy With Respect To Healthcare Expenditures In Retirement PDF Download

Health care costs are an increasingly significant category of expenditures for retirees. Studies have demonstrated that many retirees face a shortfall with respect to these out-of-pocket health care expenses, but there has been little investigation into why. Are retirees unable to save for or otherwise finance such expenditures or are they unaware of the magnitude of likely future expenditures? This article explores this question by examining what individuals approaching and in retirement expect with regard to their own future out-of-pocket health care expenditures in retirement. By conducting a survey of 2000 individuals ages 40 to 80 through Rand Corporation's American Life Panel, this study ascertains respondents' expectations regarding insurance coverage and health care expenditures in retirement and compares their answers to policy experts' estimates. While, respondents' answers neared experts' estimates on some dimensions, such as median monthly expenditures, there was a significant discrepancy on others, including in lump-sum estimations and expectations regarding long-term care costs. Furthermore, responses signaled a greater gap between expectations and likely expenditures for women and younger cohorts. Finally, respondents failed to differentiate between sources of uncertainty in spending due to high individual costs, policy changes, or health care inflation, and underestimated the possible effects of these sources of uncertainty on individual expenditures. These results suggest and the article discusses important implications for financial education, health care policy, and further research.