The Best Time to Get Retirement Healthcare and Long-term Care Coverage? Before You Need It!Submitted by Butera Wealth Management, LLC on January 30th, 2019
Contemplating a future of possible declining health or infirmity is not a pleasant prospect for any of us. Some people mistakenly think that, after age 65, Medicare will pick up any future tab. But there are many gaps and limits to Medicare coverage that can limit your options or leave you or your family members holding the bag for out-of-pocket expenses.
Putting a solid plan in place for covering your post-retirement healthcare and long-term care costs is the best way to ensure that you have choices available to you for a comfortable retirement and old age, no matter what your health status. It may seem like a complex topic, but we can help simplify the decision making process. Here are a few things to consider:
Essential Healthcare Coverage: Filling the Medicare Gaps
Medicare can be a boon to seniors with medical expenses, but it’s not a 100% solution. For example, it doesn't cover some long-term care or chronic health services. These coverage gaps can quickly add up to large out-of-pocket expenses. In fact, it’s estimated that people incur an average of $122,000 in medical costs between the age of 70 and when they die, mostly paid out-of-pocket. Five percent will even see costs of more than $300,000.
To avoid getting hit with this kind of expense, once you retire and transition off an employer’s benefits coverage, there are two things you will want to have in place:
• Supplemental health insurance. Shop around and select the best plan for your needs; once you’ve signed up it and begun having medical costs, it can be difficult to switch to a different insurance plan down the road without incurring additional underwriting.
• Prescription drug plan. The cost of prescription drugs—even when generic alternatives are available—can quickly add up. Sadly, I’ve had clients with prescription costs that exceeded $2,000/month.
These insurance policies will be your back-up for medical expenses not covered by Medicare. They will help you guard against out of pocket, unplanned costs that you may not have included in your general retirement income planning.
You might also want to plan for covering dental costs. Dental procedures, implants and denture costs can also add up quickly, and the need for them typically increases as we age, but most dental policies fall far short of full coverage for these expenses.
However, note that retirement healthcare costs are often discussed as lump sums (just as we did a few paragraphs above). To help get a better sense of the ongoing financial picture, here are some guidelines for estimating annual costs.
Long-Term Care Coverage for Your Long-Term Peace of Mind
You may already have exposure to the long-term care landscape if you’ve experienced it with one or more of your parents or elderly relatives. If so, you know that costs for long-term care and end-of-life care can be very expensive. And it can get pretty complex to navigate all of the aspects of care, daily living, and treatment.
Nationally, average costs are $6,844/month for a semi-private room in a nursing home, $3,628/month for care in a one-bedroom assisted living facility, and $20 or more per hour for health aides and homemaker services. Costs can vary based on where you live. And if you need skilled nursing care, costs can escalate to $10,000/month or beyond. Confused about all the different levels of long-term care? This article can help you sort it out.
There are some Medicare facilities available, but just because they’re Medicare doesn't always mean they are cheap. And in reality, even “full-time care” only covers your medical needs. Often family members or a paid companion is needed to provide much of the “comfort” care—little things like filling a water pitcher, retrieving a dropped pair of reading glasses, arranging a throw blanket, fetching snacks, and other tasks that busy facility nursing staff can’t always get to in a timely way.
Of course, many retirees also experience many years of vitality before they develop any need for support. Even then, assisted living or nursing care isn’t needed immediately, and just having a bit of support with heavier tasks can be sufficient. For example, you can move into a Mother-In-Law suite near younger family members. Planning your entire transition pathway, whether you will need to implement it sooner or later, is part of the whole picture.
To cover long-term care expenses, some people obtain an insurance policy; many long-term-care polices can be designed for a specific time horizon. Some people choose to self-fund anticipated long-term care costs, for example, using a Roth IRA. Some people plan to sell a home when the time comes to transition to a care facility. An important part of your planning process is looking at the pool of retirement funds and potential funds that you have available and decide where to allocate them.
Do I Really Need to Think About This Now?
As the title of this blog post indicates, the best time to plan for these contingencies is before you need them, say, when you are in your late-fifties. I know many folks that age who are still busy thinking about getting their kids through college, but the sooner you make a plan, the sooner you can put these concerns out of your head knowing the future is covered.
Many people experience their most significant earning years in their 50s and 60s, so it’s a golden opportunity to use current resources to put plans in place for the future.
Waiting until you’re 65 to retire and start tapping into Medicare is a key consideration. Retiring before 65 means you have to purchase your own healthcare policy entirely. Working for a few additional years is a way to increase your monthly income when you do retire.
My clients who have made the effort to do some advance planning, have found it to be less complicated and more rewarding than they might have anticipated. Together we ran different scenarios to help them understand their options and “what ifs”. The result: The peace of mind knowing they’ve set themselves up for a secure retirement even in the face of possible medical challenges.
NOTE: This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Louis Butera to provide information on a topic that may be of interest. Copyright 2018, Louis Butera Wealth Management, LLC.