A Guide to Saving for Retirement Healthcare

When planning and saving for retirement, one main concern for many potential retirees is how to pay for healthcare needs during retirement.  Some interesting facts pertaining to health care and retirement are:

  • According to the 2015 U.S. Department of Health and Human Services’ publication, A Profile of Older Americans, in 2014, men who had reached the age of 65 could expect to live another 18 years. Women reaching age 65 could extend that to 20 ½ years on average.
  • A retiring couple age 65 that does not have private health insurance from a former employer can expect to pay substantial out-of-pocket health care costs during their retirement years.  
  • Fidelity Investments, in their 2016 Retiree Health Care Costs Estimate, estimates that in 2016, a couple aged 65 years old would need about $260,000 to cover medical expenses throughout retirement.  This is an increase of 37% from ten years earlier.  This does not include dental care, long-term care, or over-the-counter medicines.
  • According to LongTermCare.gov, nearly 70% of people turning age 65 will eventually need some type of long-term care and support.
  • Medicare and most current health insurance plans, don’t pay for long-term “custodial care.”
  • The Genworth 2016 Cost of Care Survey reports that the national median daily rate in 2016 for a private room in a nursing home was $253.
  • The CDC states that the average length of a nursing home stay is 835 days which is more than 2 years, equaling a cost over $211,000.

The Risk to a Financially-Secure Retirement

The main risk to a secure retirement is the rising cost of healthcare. In Fidelity Investments 2016 Retiree Health Care Cost Estimate, they describe an example of the cost of health care for a 65-year-old couple.  In this scenario, it is estimated that a 65-year-old couple retiring in 2016 will need an estimated $260,000 to cover health care costs in retirement.  This amount is 6% higher than the estimate from $245,000 and the highest estimated in the 15 years of estimations.  This amount does not include long-term care services, which is estimated to cost that same couple and additional $130,000.

With health care costs on the rise, planning for future health care needs is vital for a financially secure retirement.  Some plans include:

  • Long-Term Care Services – Familiarize yourself with the variety of long-term care services available.  Find out what type of long-term care services are preferable.  Think about ways to pay for any needed long-term care services.
  • Advance Directives – Communicate any medical care wishes to a family member in the event of a catastrophic medical event.  Name someone, such as a spouse or other family member, to make medical decisions in the event of incapacitation.
  • Paying for Health Care in Retirement – Uncover the many limitations of Medicare.  Predetermine, if possible, the out-of-pocket health care costs after retirement.  Look into the various types of insurance that can help to pay for health and long-term care costs not covered by Medicare.

Long-Term Care Services

The U.S. Department of Health and Human Services estimates that the number of older Americans, 65 and up, will double from 46.2 million in 2014 to around 82.3 million in 2040.  This massive increase in the senior population complied with ever increasing life expectancies has led to the rapidly growing variety of options available to senior citizens who are in need of medical and personal care services.  Those who plan ahead can be assured that they will receive the quality of care and quality of life they desire should long-term care services be needed in the future.

There are several types of long-term care facilities available:

  • Nursing Homes
  • Assisted Living Facilities
  • Continuing Care Retirement Communities
  • Home Health Care Services

Nursing Homes

According to U.S. News, a Met Life survey in 2012 revealed that the cost of a private room in a nursing home cost an average of $248 per day.  This equates to $90,500 annually.  Even a room that is shared with another individual can run $222 a day or $81,000 per year.  Although Medicare, Medicaid, or other resources can help minimize the overall cost, having a plan in place will help with the transition to a nursing home.

Assisted Living Facilities

For those who need help with their daily lives, assisted living is becoming a popular option.  Bathing, medication management, cooking, and managing finances are a few of the chores that an assisted living facility can assist with when a senior is unable to perform these tasks.  Bankrate reports that the national median monthly rate for a one-bedroom unit in an assisted living facility is $3,500.  This equates to around $42,000 per year.

Continuing Care Retirement Communities

For seniors with the financial means, a continuing care retirement community (CCRC) may be the best living option.  CCRCs are a combination of independent living, assisted living, and nursing home care.  SeniorLiving.Org expert Ken Teegardin informs readers that health services, meals, personal care, housekeeping, transportation, and emergency help are just a few of the services offered at many CCRCs.  The entry fee for many CCRCs is a bit pricey, therefore, not everyone will have the financial means to “buy-in” to a unit.  Therefore, it is important to begin early with a financial plan if a CCRC is in a person’s future.

Home Health Care Services

For those who wish to remain at home, but need continued care, a home health service can provide a team of people who come into the home to help with daily activities such as cooking, cleaning, washing, medicine, finances, and other day-to-day activities that the maturing adult may not be able to perform alone.  The cost can be very expensive, but if planned for in advance, a person can live at home comfortably.

As with any complex or complicated financial decisions, seeking the advice of a qualified financial advisor who has experience and knowledge in long-term care services, can save individuals tens of thousands of dollars.  Let an experienced financial advisor help navigate the long-term care choices that will lead to a better retirement.

Keep reading: How To Protect Your Family Against Unexpected Change >>

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