Retirement Income, Healthcare Costs, and Homeownership—Food for Thought on the Future of the Longevity Economy

Posted by CC Andrews

Sep 20, 2017 11:00:00 AM

A recent National Investment Center for Seniors Housing and Care (NIC) blog post caught my eye because it covers some important topics and research relevant to senior living providers and their prospective thought-2123970_1920 copy.jpgcustomers. Author Lana Peck outlined studies on Social Security, medical spending, and retirement and security. Specifically, the post covers how Social Security will impact the behavior and consumption patterns of seniors and health costs and their impact on retirement security.

One study that examined how Social Security benefits are affected by out-of-pocket medical spending found that the average retiree spends a substantial share of his or her Social Security income to health expenses. What’s more, premiums make up largest share of medical spending for most retirees. Not really a surprise, I know, but consider the following additional stats from the study:

  • 75% is the average amount of social security benefit left for non-medical expenses for the average retiree.
  • 30% of retirees’ household income is spent on housing, taxes, and non-housing debt.
  • 10% of retirees (give or take) have less than one half of their OASI (Old Age Survivors Income) remaining for non-medical expenses.

Peck also noted that, in addition to these findings, Medicare beneficiaries also pay more out-of-pocket for health care as a share of household expenses than non-Medicare households, “and with health costs projected to rise more rapidly than Social Security income, these trends are likely to continue and worsen over time,” she said.

In another study, researchers determined the anticipated costs for “health shocks” (one or more of eight health conditions and three intensive health events) that they found specifically cause significant declines in net worth including stroke, cancer, lung disease, and health-related events such as hospital and nursing home stays, (including the loss of a spouse), and applied factors of net worth including home equity, other real estate, and business and financial holdings. Their findings:

  • Someone at age 65 could expect a decline of between $30,000 and $90,000 in overall wealth depending on their gender and marital status due to health conditions.
  • Some health shocks are more costly than others. Specifically, lung disease ($29,000), stroke ($25,000), nursing home care ($15,000), and spousal death ($30,000).
  • The “wealth cost” of health shocks is about 9% of household net worth at age 65 for married individuals and for single men, but about 22% of net worth for single women.

Yet another study looks at issues around using homeownership as an investment that can be used in late life as income for health costs in retirement. This may be a sure safety net for current, older homeowners but for future cohorts, the ability to buy homes is fast becoming more and more elusive.

As the blog’s author puts it: “This research is especially important because of the aging population, increased life expectancy, and increasing health costs which shed light on the need for retirement planning that includes preparing for late life health shocks.”

I couldn’t have said it any better. This research is worth a deeper dive to get at the heart of the relationship between consumer health and financial trends to help inform your strategic decisions.

If you want a focused approach to your strategic decisions, facilitated by experts in the senior living field and candid feedback, contact Quantum Age today.

Topics: longevity economy, retirement, social security, health care costs

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