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Health Care Cited as Top Hurdle to Early Retirement

When asked to name barriers to financial independence and early retirement, Americans are less concerned about uncertain market conditions or inflation than they are about health care expenses. 

According to survey results from TD Ameritrade, Americans aged 45 and older with $250,000 or more in investable assets overwhelmingly cite health care costs (57%) as the top barrier to financial independence and retiring early, ahead of uncertain market conditions (37%) and inflation (35%). 

Interestingly, many respondents actually believe that retiring earlier will help them live longer. At the same time, however, they understand that longer lifespans are also generating higher health care costs. The findings show that 76% of the financially independent agree that retiring earlier will help them live longer. In fact, only 15% of financially independent retirees report being stressed compared to 47% of their non-retired counterparts.

Not surprisingly, the top worries about retiring early include outliving their money (53%) and unexpected costs for a health emergency (46%). In addition, 64% of financially independent respondents say a major health issue would have either a “major or moderate impact” on their ability to achieve financial independence. 

On a positive note, many respondents say they are maxing out their HSAs (46%) to cover these rising costs. But many also plan to turn to Medicare as their top tool for support in retirement (76%), followed by supplemental (51%) and primary health care insurance (42%). Yet more than half of pre-retirees (61%) are not confident that Medicare will cover the bulk of their retirement medical expenses. What’s more, only 9% indicated they plan to use an HSA to help cover these costs.  

“While Americans are enjoying longer lifespans, which may mean covering health care expenses and long-term care costs for extended periods of time, they also face the increasing costs of health care,” notes Matt Sadowsky, TD Ameritrade’s director of retirement and annuities. The good news, he says, is that Americans recognize that health costs should be a top priority when planning for retirement and nearly 60% showing interest in holistic wellness planning, including financial and physical health. 

The survey was conducted online within the U.S. by The Harris Poll on behalf of TD Ameritrade from Sept. 28 to Oct. 6, 2018, among 1,503 U.S. adults aged 45 and older with over $250,000 in investable assets, including 750 who are financially independent or on the path to be.