A study conducted by the Federal Reserve Bank of Chicago in 2006 found that the elderly tend to spend a significant portion of their wealth in the few years preceding death. For single-person households, wealth decreased by 30% in the year preceding death and by 50% in the three years preceding death. Assets of similarly aged individuals who lived remained approximately the same.
The main cause of this substantial decline was a serious illness, which increased out-of-pocket expenses for drugs, doctor visits, and hospital and nursing home stays. Those additional expenses, combined with burial expenses, were the cause of 24% of the decline in assets over a three-year period and 37% of the decline in the last year of life.
Thus, it is important when considering how much money you will need for retirement to make provisions for increased medical costs at the end of your life.