Medical expenses are the leading source of debt for America’s silver generation, according to a new survey. That shouldn’t be a surprise. Many people before retirement or early in retirement report that one of their greatest fears is not being able to pay all their medical expenses. Survey also show that most people don’t know even the basics of Medicare, especially what it doesn’t pay. Many people roll into retirement believing that Medicare or their former employers or someone will pay all or most of their medical expenses. That’s not the case by a long shot. That’s why in Retirement Watch I regularly explain the different potential sources of paying for medical bills and how to use them to build safety and predictability into your finances.
One-fourth of retirees incur debt due to unexpected medical expenses, according to the results of our April poll. Education costs – the primary source of debt for working Americans – was a factor for less than 8 percent of retirees. The retired demographic was also less likely than working Americans to incur debt through divorce and “unrestrained personal spending,” but more likely to have debts related to the death of a spouse.
Health care costs pose a particular burden to the nation’s retirees, according to federal data that shows that senior citizens spend a disproportionately high percentage of their income on health care costs, which continue to rise faster than the overall rate of inflation.