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Health costs can disturb our peace of mind

Sachem Public Library in Holbrook is holding

Sachem Public Library in Holbrook is holding "Researching Health Issues on the Internet," a free seminar where you will learn which online sites have trustworthy health information. Photo Credit: Istock

When it comes to retirement, most Americans age 45 and older say that peace of mind is seven times more important than accumulating wealth. According to a new survey from Merrill Lynch, people are reconsidering what retirement means and how they are going to get there.

The study starts with a Zen-like declaration: "Today's retirees aren't retiring -- they're moving on to explore new options, pursue old dreams and live life to the fullest."

When I read that line, I admit that I said to myself, "Who are these people?" Fortunately, the mushy lifestyle question was just a way to get into the meat of the study, which explores the issues that worry people the most about retirement.

When I was a financial adviser, what concerned most people about retirement was not having enough money. (In the 1990s, the top priority was being able to retire early with lots of dough, but the Internet boom and bust, followed by the financial crisis and Great Recession, dashed those hopes and dreams.) Now, the focus has shifted: The No. 1 one retirement worry has become health problems (72 percent), followed by not being a burden on the family (60 percent).

Survey respondents understand that health-related issues and unanticipated medical expenses can blow up even the soundest retirement plan. According to the recent Time magazine article "Bitter Pill: Why Medical Bills Are Killing Us," 60 percent of bankruptcies in the U.S. today are related to medical bills.

Even without a catastrophic event, medical bills will eat up a big chunk of retirement savings. Fidelity Investments reports that a 65-year-old couple retiring in 2013 is expected to need $220,000 to cover health care costs in retirement, not including nursing home or long-term care. The estimate applies to a couple with traditional Medicare and assumes life expectancies of 17 years for men and 20 years for women.

The good news is that the total is an 8 percent drop from last year's estimate of $240,000. The bad news is that the decline may be attributed to people cutting back on medical care due to the economy or because of early retirement. The Merrill Lynch study found that nearly three out of five retirees say they retired earlier than they expected: "Although early retirement has often been equated with financial success, health problems are actually the top reason."

Unfortunately, just because you want to work longer doesn't necessarily mean that there will be an opening for you, or that you will physically be able to perform your job.

So, what are we supposed to do with these reports? As a financial journalist and self-identified lover of statistics, I enjoy these research papers because they help to highlight trends and underscore many of the problems that I addressed with clients in the past. That said, as I explained in a previous column, these studies are like various financial literacy efforts that are financed by big financial institutions whose motives may be suspect.

It's clear that big financial institutions conduct research so that people like me write about it, and then as you read about the facts, you may be encouraged to begin a relationship with those companies who have paid for the reports. That's why conclusions to the studies often end with something like this from Merrill Lynch: "We believe people want and need to know more about their retirement years before they are upon them, to gain greater clarity about what they want to achieve, and to understand what is possible in this stage of life." The obvious omission is that the company responsible for the research can help consumers gain that clarity and elusive peace of mind.

But before you schedule your appointment, don't forget that a lot of this information is available online through easy-to-use calculators. If you do need help with planning for your retirement, make sure that you understand exactly how you are paying for advice and try to work with professionals (fiduciaries) who put your interests first.Jill Schlesinger, a certified financial planner, is a CBS News business analyst. She welcomes emailed comments and questions.

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