Underestimating Expenses

One of the challenges facing pre-retirees is accurately predicting changing expenses as they age, including medical costs, debt, and accounting for inflation. While median household expenses decline with age, housing related expenses remain the single largest spending category (see graph below). Health care expenses are the second largest component, and these steadily increase with age. (EBRI, 2012b)

Failing to Appreciate the Cost of Health Care and Long-Term Care

  • Many Americans don’t understand the costs of health care in retirement. “43% of middle-income Americans are paying more for healthcare with Medicare than they expected they would.” (CSR, 2012)
  • Long-term care can be a very large cost, and is hard to predict. “A typical married couple age 65 can expect lifetime uninsured healthcare and nursing home costs of $260,000.” (Center for Retirement Research at Boston College, 2010)

Failing to Consider Debt


“About a third of the 65 and older households that owned a home in 2009 had a mortgage, according to the Census Bureau’s American Housing Survey, which also put homeownership in this age group close to 81 percent during the second quarter of this year.” (Elmer, 2011)

  • The proportion of families with housing debt has increased. The median amount owed also is on the rise. 55% of families headed by a person 55-64 had housing debt in 2007, compared with 41% in 1992. (EBRI, 2009)
  • Housing debt is problematic as incomes decrease in retirement and individuals choose to age in place. 9 in 10 older households express the desire to stay in their homes as long as possible. (Center for Housing Policy, 2012)


  • Consumer debt is on the rise, as is the median amount owed. 1 in 2 families headed by a person 55-64 had credit card debt in 2007, compared with about 1 in 3 in 1992. (EBRI, 2009)

Failing to Consider Inflation

  • Compared to other planning activities, only 72% of pre-retirees and 55% of retirees are calculating the effects of inflation on their retirement planning (SOA, 2011). This highlights the need for individuals to better understand and manage inflation and longevity risks when planning for retirement.
  • At the same time, retirees and pre-retirees express high levels of concern about the value of their savings keeping up with inflation (69% of retirees and 77% of pre-retirees). (SOA, 2012)