In our Retirement Is For Living blog series, we have introduced a planning process which includes a consideration of the risks you may encounter in the decades ahead. So far, we have examined family, financial, and public policy risks. However, we saved one of the biggest retirement concerns for last: healthcare and housing. A survey of Americans over 65 finds that 50% of retirement expenses can be attributed to these two categories. When only two items comprise half of your budget, unforeseen events can derail even the best laid retirement plans.
Rising medical costs and the possibility of cuts to government benefits threaten not only your financial well-being but your peace-of-mind in retirement. Considering that many individuals will spend over 20 years in retirement, it’s important to remember that your health and mobility will be different at 65 compared to 85. You need to consider caregivers for both you and your spouse and changes to your housing needs as you age. You need to put contingency plans in place to give yourself options, and we’re here to help you do just that.
Healthcare: Getting a Handle on Medical Costs
It goes without saying that retirees usually have greater healthcare needs and may require longer and more frequent treatment for health-related issues. A typical 65 year-old woman can expect to pay over $5,000 in out-of-pocket costs — and that’s with comprehensive coverage and decent overall health. For the chronically ill, prescription drug costs can blow a retirees budget out of the water.
The best way to combat healthcare costs is my carefully matching your healthcare plan selection with your healthcare expectations. Nerdwallet offers a great tool for predicting your retirement healthcare needs based on health status. Often, you’ll need to decide between Traditional Medicare (with and without prescription coverage), Medicare Advantage, or some sort of bundling with employer-sponsored coverage based on your expected needs.
These coverages differ in how much they cover and their costs, so retirees will need to make trade-off decisions when selecting a plan. Individuals in poor health or planning major surgery may consider higher premium plans to reduce the risk of extreme or unpredictable out-of-pocket costs. Others, especially those who are younger or expect to remain healthy, may experience lower costs by opting for a less extensive supplemental policy.
Long-term Care: Navigating Insurance Options
Unfortunately, all retirees face the possibility of a debilitating illness or injury that requires long-term care. This risk is a source of worry for retirees – nearly half fear they won’t have enough money for long-term care or a nursing home – yet most opt against long-term care insurance due to the high costs. Some think their good-health will continue into their golden years or think a spouse or children will be able to tend to them, if needed.
Retirees need to understand the medley of long-term care insurance options that are in the marketplace. At Magellan Financial, we work with our clients to make sure they know the fine print so that they make the best decisions for themselves and their loved ones. State insurance regulators and industry organizations recommend retirees take the following seven factors into consideration when weighing long-term care insurance options:
- Company reputation & legitimacy
- Coverage parameters
- Benefits payout
- Waiting period
- Benefits Protection
- Tax Implications
Long-term care insurance is a tough decision but it doesn’t have to be avoided. Do your research and decide what type of care you are most likely to need. Start with a reputable resource like LongTermCare.gov and if you want long-term care integrated into your larger retirement planning process, contact us at Magellan Financial today.
Housing: Changes in Your Living Needs
The odds that you or your spouse might need living assistance rises substantially with age. The need for care can occur suddenly due to an accident or may gradually evolve due to chronic disease. And even if you don’t need care, your mobility may be severely impacted. Some housing situations can accommodate retirees as they get older. But for many, the homes where you raised a family may not be the best option for your creaky knees. Here’s what you can do.
Consider your house within your larger, financial picture in retirement. Your home may be your largest asset. But is it also your largest expense due to maintenance and taxes? Downsizing to a more senior-friendly home may better meet your physical needs and free up cash for other interests. If you’re set on remaining in place, think about how you could make your home a better fit for you and for caregivers who may have to accommodate you down the road. Homeadvisor offers some great tips for retrofitting your home, including preparing it for single-level living and updating surfaces to reduce the risk of slips and falls.
Live the Retirement You’ve Been Working Toward
Remember that health-related costs can impact not only your financial well-being but also your peace-of-mind as you progress through retirement. Hopefully, retirement will be a long, healthy journey for many of us, but we still need to carefully consider how our lives might be very different as we get older. Unforeseen health-related events can impact our need for care and the requirement that we leave the homes we’ve grown to love.
You need someone in your corner to help mitigate against those risks. Magellan Financial believes that professional wealth management has only one definition of success: when our financial services allow our clients to realize their lifestyle and financial goals in retirement. Our thorough, thoughtful, risk-based strategies are designed to support your greatest objectives, so you have the freedom to enjoy them. After all, your Retirement Is For Living.
The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates The material has been prepared or is distributed solely for informational purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy.
When considering rolling over your QRP assets, key factors that should be considered and compared between QRPs and IRAs include fees and expenses, services offered, investment options, when you no longer owe the 10% additional tax for early distributions , treatment of employer stock, when required minimum distributions begin and protection of assets from creditors and bankruptcy. Investing and maintaining assets in an IRA will generally involve higher costs than those associated with QRPs. You should consult with the plan administrator and a professional tax advisor before making any decisions regarding your retirement assets.