Trying to save enough for retirement is always one of the major concern for most Americans. It comes up in every discussion I have with clients. But I’ve been adding one topic to the agenda that most people haven’t thought about: the cost of health care in retirement. You’ve got to plan for this.
Brokerage firm Merrill Lynch released a survey recently where those in affluent households were asked about healthcare while retired. 79% indicated it was their #1 concern…these were folks with at least $250,000 in investable assets who were confident about being able to cover their basic expenses. Increasing longevity, great drugs (medically speaking) and taking care of ourselves have pushed this to the forefront. I’m sure you’ve known someone who has ended up spending a fortune paying for care later in life. The Merrill Lynch study says 62% of folks over age 50 haven’t done a thing. Don’t be one of them.
Here’s a few ideas I hope will get you pointed in the right direction:
* Set up a healthcare account. Once you’re in your 40s, save what you can. Consider it a shadow retirement account, not nearly as robust as your 401(k) or IRA, but you might earmark a Roth IRA for this purpose. Having tax-free money for health care costs may be exactly what helps you maintain your standard of living down the road
* Long term care insurance. This gets more expensive as you get older, but for many it will provide important piece of mind. It will help cover the cost of care at home or at a nursing home, should you be unable to perform two of six “activities of daily living” like dressing yourself, getting from your bed to a chair or feeding yourself. Nobody wants to think about this, but planning may very well protect the lifestyle you and your family have worked so hard to build
* You may have to work longer. Hell, you may have to do that anyway but be prepared for this. Getting a part-time job while retired may also be an option. The economy will come back.
* Medicare. It’s very important that you enroll in Medicare during the open enrollment period around your 65th birthday. Not doing so means a 10% penalty each year for life. Face it…Medicare has a mandate…and penalties. It’s worked that way for years. I don’t get why it’s an issue with the Affordable Care Act…
* If you’ve already retired, I think it’s important to review your prescription and Medicare supplement coverage every year. Insurance companies are notorious for slipping in price increases here and there or dropping some prescriptions from their different plans. I’d do the annual with a couple of friends where you each get the information on different companies and compare coverage and costs. Then have a party!
Good luck reworking your monthly budget. Until next time, here’s to good planning!
Great advice Rosemary. I’ve already established a healthcare savings account and purchesed LTC insurance through my employer. We all need to thinkbout these things well before retirement.
August 18, 2012 at 12:40 pm