The Effect of the Risk of Out-of-Pocket Spending for Health Care on Economic Preparation for Retirement

TitleThe Effect of the Risk of Out-of-Pocket Spending for Health Care on Economic Preparation for Retirement
Publication TypeReport
Year of Publication2010
AuthorsHurd, MD, Rohwedder, S
InstitutionThe University of Michigan, Michigan Retirement Research Center
KeywordsDemographics, Healthcare, Retirement Planning and Satisfaction
Abstract

After retirement, the primary sources of uncertainty with respect to an individual s economic status are longevity, investment outcomes and out-of-pocket spending on health care. In previous work, we estimated economic preparation for retirement, taking into account the risk of living to an advanced old age and the concomitant risk of running out of resources. But while we accounted for the average level out-of-pocket spending for health care, we did not account for the risk of out-of-pocket spending. In this paper we augment our model for this omission. We find that the risk of out-of-pocket health care spending reduces economic preparation for retirement from about 72 of persons in the age range 65-69 to about 63 . However, this relatively modest reduction is quite unequally distributed: about 57 of single persons are adequately prepared when health care spending is not stochastic, but just 44 when it is. Among single women who are not high school graduates the percentage adequately prepared declines from 33 to 15 .

URLhttp://ideas.repec.org/p/mrr/papers/wp232.html
Endnote Keywords

retirement planning/Socioeconomic Status/Out of pocket costs/health care spending

Endnote ID

62691

Citation Key5833