Make sure you consider these costs in retirement.
Long term care and other money eating costs in retirement.
I have clients return to me over the years when laws, events or time require a need to make changes in wills or trusts, apply for Medicaid, pre-plan for long term care costs, update their plan or move in another planning direction. Just last week, a client in Boca Raton, made major changes in her planning because her son became a “special needs adult”.
Although this client had some wealth, I am often shocked at how much retirement savings can dwindle over the years. These are the two that are the most frustrating for me and the least prepared for by my clients.
Healthcare and Long term care: The six-figure retirement-savings destroyer
The average couple who reaches 65 years old in 2018 will need about $280,000 saved to cover healthcare expenses throughout their retirement, according to Fidelity not including the astronomical expense of long-term care.
I read the Fidelity article and it doesn’t break down where these expenses come from. But having both personal and professional experience, I would advise people to be prepared for what is not covered by traditional Medicare or Medicare Advantage:
During just this last year, my husband and I have personally spent out of pocket for supplement insurance, long term care insurance premiums, chiropractic, dental and hearing aids, many many thousands and thousands of dollars. (He go the hearing aid, not me!)
Long term care can be extremely expensive and isn’t covered by Medicare. Whether you are a couple in Margate or a single in Lake Worth, care at home, assisted living or in a nursing home, can easily cost more than $100,000 per year. Because of this, you may want to consider long-term care insurance as you approach retirement age or early in retirement (Click here for information on the new Hybrid Insurance).
Your children
Depending on where you are your children many need college, grad school, weddings etc. But what is most often the case, and often not prepared for is the cost of supporting adult children. It is common for middle class retirees to give children large sums of money for housing, education for grandchildren and other support. Sometimes it’s because of a true emergency but more often it’s supporting a lifestyle of the kids at the expense of the sound retirement of the parents. This is not a judgment call; just a warning of why some people run out of money.
So what can you do?
Here’s some steps you can take to plan for healthcare costs in retirement:
Save money specifically to cover healthcare costs in retirement. A health savings account is an ideal place to do this — if you qualify for one.
Consider buying long-term care insurance as you get close to retirement age. Click here for options on new types of long term care insurance.
Keep gifts to a minimum.
Stay tuned for our next blog on the Great Wealth Transfer.
