Healthcare Costs

Healthcare costs are a huge disrupter in retirement – from the worry that sits in the back of your mind wondering how long your good health will last and then from the financial havoc that occurs if it doesn’t last. Being armed with the knowledge of exactly what costs you’ll be facing in retirement is a critical first step to understanding this “obstacle” and finding the appropriate solution that fits your circumstance. We’ve compiled some statistics and research to help you get started:

Please click on the links to learn more about:

Have a question about Healthcare Costs? Contact us now.

Healthcare Costs

Healthcare costs are a huge disrupter in retirement – from the worry that sits in the back of your mind wondering how long your good health will last and then from the financial havoc that occurs if it doesn’t last. Being armed with the knowledge of exactly what costs you’ll be facing in retirement is a critical first step to understanding this “obstacle” and finding the appropriate solution that fits your circumstance. We’ve compiled some statistics and research to help you get started:

Please click on the links to learn more about:

Healthcare Costs that Medicare Does Not Cover
What Does Medicare Cover?

The Financial Impact to You and Your Family
The Emotional and Physical Consequences to Your Loved Ones
Solutions

Have a question about Healthcare Costs? Contact us now.

Healthcare Costs that Medicare Does Not Cover

According to a survey by AARP, declining health and the associated costs rank in the top 2 worries of retirees. And rightly so, because the costs of long-term care are not covered by Medicare and can have a devastating impact on a retiree’s assets and standard of living. In 2018, the cost for home health care or assisted living is over $4,000/month and the cost for a semi-private room in a full skilled facility is over $8,000/month1. And they are rising at a rate of 5.5% per year2. Even worse, risks to our retirement lifestyle don’t happen in isolation. What about those retirees who suffered a significant health trauma in 2008? They would have lost over 35% of their savings in the stock market at the same time they were paying for catastrophic health costs – forever altering the trajectory of their remaining retirement years. There was no time to “leave their money invested and let it recover”. They needed the money.

7 out of 10 retirees will need some sort of long-term care assistance, yet few retirees have a long term care plan. During the average 3 years of time that long-term care is needed3, a retiree could easily spend between $144,000 to $288,000 on long term care health costs. Multiply that by 2 if you’re married, and a couple could have over a half million dollars in health care costs to cover.

What do we mean by the phrase “long term care”? A few definitions for you:

Home health care – trained care providers, both medical and non-medical, help you maintain an independent lifestyle. These services are comprehensive and include chore services, errand running, and home modifications. Home is where we all want to receive our care, for as long as possible!

Adult day care – provides social and health-related services during the day to frail, elderly, or disabled individuals in a community-based setting. Adult day care can offer relief for family members who are caregivers and is ideal for those who would benefit from a group setting outside the home.

Assisted living – provides help with bathing and dressing, medication reminders, and light housekeeping. It’s designed to help those with minimal needs to remain as independent as possible.

Full skilled care – aka “nursing home”. Nursing home services are mostly for those who need more intensive medical care, such as wound care, rehabilitation, or help with respirators or ventilators. Nursing home care may be temporary or permanent.

What Does Medicare Cover?

Medicare’s coverage of these costs is minimal. For example, Medicare will pay for some medically related home health care costs if your need is “intermittent”, as in once a week for 3 weeks. Medicare does NOT pay for an assisted living facility and it only pays for your first 100 days of full skilled care in a nursing home, IF it was preceded by a 3-day inpatient hospital stay. Medicare simply does not provide protection from the financial calamity that long term care costs create.

The Financial Impact to You and Your Family

If you don’t include health care planning in your retirement plan, several financial scenarios could play out.

If you are in the lucky 30% of people who never need long term care, you could still live your retirement years in a frugal lifestyle saving for the “what-if.” You end up leaving more money to your heirs than you ever intended, because you never spent it – waiting on the “just in case”.

If you are in the 70% of people who do need long term care, like most people, the bulk of your retirement savings is in pre-tax IRA’s and 401k’s. Because every dollar withdrawn from these accounts is taxable, you effectively increase the cost of your care by your tax rate – 22% to 32% for most retirees. So instead of your care costing $4,000 to $8,000/month, it will cost you from $5,125 to over $10,000/month. Sadly, the savings you worked a lifetime to build is being doled out to health care providers and facilities – instead of going to your kids or grandkids as a legacy.

Even more worrisome for retirees facing these healthcare costs is the unknown of how long their savings will last before they have to rely on Medicaid. This governmental program is a safety net that ONLY covers full-skilled nursing homes, not assisted living or home care. If you don’t meet the requirements for a full-skilled nursing home, your family members would be forced into being your caregiver.

The Emotional and Physical Consequences to Your Loved Ones

We can all acknowledge the financial consequences of not having a plan for long term care costs – whether those consequences fall on you, your spouse, or your adult children. But there are emotional consequences when we put our loved ones in the role of caregiver instead of care coordinator. According to the US Department of Health and Human Services, there are over 44 million people in the U.S. who provide unpaid caregiving services in any given year. Interestingly, over 65% of those are women. The average age of a caregiver is only 49 and 59% of caregivers have another job4.

Family caregivers experience:

Increased absenteeism from work and less opportunity for promotion

• Reduced retirement savings
• Increased stress, depression and anxiety
• Increased risk of physical illness and injury
• Increased risk of friction among family members

Do you agree that long-term care planning cannot be ignored? The financial, emotional and physical consequences to you and your family are too high a price to pay for inaction. Making a plan that will give your loved ones the financial ability to be your care coordinator and not your care giver is the greatest gift you can give them.

Solutions

You’ve probably guessed that we believe in facing this potentially huge, bankrupting cost head on. There are multiple solutions to this vexing obstacle – it’s just a matter of weighing the pro’s and con’s of each solution and choosing the one that’s right for you and your loved ones.

Keep learning! We’ve outlined several solutions for you at our Healthcare Planning Solutions page. Peace of mind awaits.

Call Us at (865) 622-2162