Healthcare Strategies
One of the reasons people fear retirement is they are concerned about needing Medicare or other long-term care. It’s a legitimate concern, as 70% of people 65 and older will need some form of long-term care, according to the U.S. Department of Health and Human Services.
Currently, the cost of long-term care is not exactly budget-friendly, especially for a retiree on a fixed income. Here are a few national cost averages for a few different types of long-term care:
● Nursing home: $6,944 per month for a semi-private room
● Assisted living facility: $3,628 per month for a one-bedroom unit.
● Health aide: $20.50 per hour
*U.S. Department of Health and Human Services
Despite the high cost of long-term care, it is hard to find many Registered Investment Advisors (RIAs) or professional financial advisors actively preparing clients for these potentially high expenses.
We believe it is as important to follow a comprehensive healthcare strategy as it is to adhere to savings and investment strategies. Good healthcare strategies focus on Medicare and long-term care strategies that can create a safety net for your retirement funds.
Medicare & Long-Term Care Planning
Medicare is a federal health insurance program for those 65 or older, with a few exceptions. The insurance covers necessary acute care like doctor visits, prescriptions and hospitalizations. What Medicare does not cover is most long-term care services, also known as custodial care or personal care.
To give you an idea of what Medicare covers, here are the four different parts to Medicare:
● Part A: Hospital insurance covering health care costs at medical facilities.
● Part B: Medical insurance that covers health care outside of medical facilities.
● Part C: Medicare Advantage (MA) plans. These are plans offered by private insurers that provide similar coverage as Parts A, B and D.
● Part D: Prescription drugs insurance through Medicare-approved insurers.
To fill in the gaps, consider using any of the following strategies for long-term care:
Traditional long-term care insurance: While these plans are not cheap, they are customizable and protected against inflation. They offer numerous benefits, and they are ideal for those who already have life insurance.
Fixed Indexed Annuities: These plans are desirable for those who can not qualify for traditional life insurance plans or long-term care insurance. Income coming from fixed annuities will help you pay for costs associated with long term care.
Life insurance: Unlike traditional long-term care insurance, standalone life insurance does not have a “use-it-or-lose-it” component. Also, hybrid life insurance offers the flexibility to convert death benefits to long-term care benefits.
Short-term strategies: For those nearing retirement without a health care strategy already in place, short-term strategies offer fast solutions. For example, exchanging a life insurance policy for liquid assets is a quick way to fund long-term care costs.
Reverse mortgages: This is a home loan allowing a person to leverage their home equity to receive a lump sum of cash, monthly installments, or a line of credit. Typically, the loan is only paid back when the borrower dies or vacates the home for a full year.
Continuing care retirement communities (CCRCs): The primary benefit of these communities is that they offer multiple levels of care: independent living, assisted living and nursing home care. That means a person can stay the rest of their life in the CCRC moving through the different care levels as needed.