Adequately preparing for retirement takes a lot of diligence. Where will you live? How much do you plan to travel? What will your annual expenses be?
But as much as you prepare, it's hard to anticipate certain expenses leading up to and during retirement. Chief among these is the cost of health care, which Americans says is their No. 1 fear about saving enough for their golden years, according to new data from Northwestern Mutual's 2017 Planning & Progress Study.
The number of Americans who see health care costs as the top obstacle to financial security in retirement rose to 58 percent this year. That's up from 45 percent in 2016.
Americans' second greatest fear falls in line with this: 44 percent of survey respondents cited lack of savings as a top obstacle to a comfortable retirement. Uncertainty about the future of Social Security runs deep as well since only 20 percent of respondents believe that the program will be around when they retire.
"What we're seeing is a confluence of complicated dynamics," Rebekah Barsch, vice president of planning at Northwestern Mutual, says in the survey. "Longer lifespans, government debate around the future of health care and Social Security and continued economic uncertainty all add another layer of unpredictability to the already challenging task of retirement planning."
Few Americans are fully aware of the enormous burden future health care costs pose. A recent financial literacy quiz from financial services company Financial Engines asked, "How much will the typical married couple retiring at age 65 spend on out-of-pocket costs for health care throughout retirement (in today's dollars)?"
The results were telling: Only a scant 6.9 percent of respondents answered correctly. Most people grossly underestimated.
The average 65-year-old couple covered by Medicare parts B, D and a supplemental insurance policy will spend more than $250,000 on health care costs in retirement, according to the survey.
And despite the ever-rising cost of health care, retired Americans' ability to pay for it is on the decline. "As health care costs increase faster than economic growth, Medicare taxes and the Trust Fund will cover less and less," Joe Landau, founder of the Allure Group, reports in a recent column on CNBC. "By 2033, some pundits say, the Trust Fund will be bankrupt, and taxes will pay only for 48 percent of the costs."
Although the future of both health care and Social Security will remain political and economic variables, individuals can still take steps to prepare themselves. That starts with a well-padded retirement fund. The simplest way to prepare is to begin socking away as much as you can as early as you can, even if it means prioritizing your own future over other financial goals, such as paying your kid's college tuition.
You might also consider contributing to a retirement savings account, such as your employer's 401(k) plan or a Roth IRA or traditional IRA. No matter how you choose to save, the most important step is to open at least one account.
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