According to the U.S. Department of Health and Human Services, today’s 65-year-olds have a 70 percent chance of needing long-term care at some point in their lives.1 Long-term care is extended assistance with basic daily living activities such as bathing, eating, dressing, mobility and more.
Long-term care is usually provided either in a facility or in the home. As you might expect, this kind of care can be expensive. A recent Genworth study found that the average monthly cost of an extended living facility was $3,750. A full-time home health aide cost more than $4,000 per month.2
Many seniors need long-term care for several months or even years. The cost can add up over time and quickly deplete your retirement assets. Fortunately, there are tools you can use to cover the cost.
One popular strategy is to use long-term care insurance. You pay premiums today, and the insurer pays for some or all of your long-term care costs in the future. Many long-term care policies cover care provided in either a home or a facility.
Approaching retirement? If so, you may be surprised to learn that one of your biggest expenses could be health care. Many retirees assume that Medicare will cover most of their medical expenses. While Medicare is a valuable program, it doesn’t cover everything. According to a recent study from Fidelity, the average married couple will pay $275,000 for out-of-pocket health care costs in retirement.1
Those out-of-pocket costs include a number of different expenses, such as premiums, deductibles, copays and more. You also may face significant costs for long-term care, which is not reflected in the Fidelity estimate. As you get older, you may become more vulnerable to illness and injury. It’s possible that health care and long-term care costs could deplete your assets.
The good news is there are steps you can take to limit the impact of health care costs on your retirement. Below are three tips you may want to consider as part of your health care funding strategy. If you haven’t yet developed a plan, now may be the time to do so.
If you’re approaching retirement, it’s likely that you’ll have to plan for a long-term care need at some point in your lifetime. According to the U.S. Department of Health and Human Services, today’s 65-year-olds have a 70 percent chance of needing long-term care.1
Long-term care is extended assistance with basic daily living activities such as mobility and bathing. It’s often provided in a facility, but it can also be offered in the home via a private nurse or home health aide.
Regardless of where care is provided, it’s usually a costly service. According to a 2017 Genworth study, the average cost of a room in an assisted living facility is $3,750 per month. In-home care may actually be more expensive. The average monthly cost of a full-time home health aide is more than $4,000 per month.2 If long-term care is needed over many months or several years, it can become a sizable drain on one’s retirement assets.
Unfortunately, long-term care usually isn’t covered by Medicare. It’s true that Medicare Part A covers skilled nursing care and nursing home care. However, those services are only covered temporarily and only if the care is related to a specific ailment that was treated in a hospital. Medicare doesn’t cover long-term assistance services.
Local business leader, Kirt Carstens, hosting new national retirement preparation course: Simplify Your Retirement
For many in retirement, the fear of dying seems to be replaced by the risk of outliving one’s income, and local financial industry professional Kirt Carstens aims to help educate local consumers of retirement best practices to help mitigate those concerns.
Carstens will teach a new two-day retirement income planning course, Simplify Your Retirement, at Iowa Lakes Community College in Spencer, helping attendees identify the most pertinent risks in retirement for their personal situation. Empowering baby boomers to prepare for a stable retirement income, the comprehensive personal finance course is best for those in the early stages of retirement or those about to retire, and addresses difficult retirement decisions including income planning, Social Security maximization and risks to avoid.
“For baby boomers, there’s been a shift in retirement income planning as compared to previous generations—the basic financial rules of thumb have changed since the parents of boomers retired,” Carstens said. “This course helps those concerned with their finances and wanting to prepare for market volatility.”
Participants will learn about considerations as it pertains to retirement income planning including health care, inflation, taxes and other personal concerns. Additionally, the course addresses reasons why some retirees run out of money, along with options for drawing Social Security, defining core priorities, and developing reliable retirement income. Upon completion of the course, attendees will receive a complimentary, personalized retirement income plan analysis invitation from the course instructor.
Carstens will offer the first session of the two-day retirement income planning course on Tuesday, April 3 from 6:30 p.m. - 9:00 p.m. with the second session commencing on Saturday, April 7 from 9:30 a.m. – Noon at Iowa Lakes Community College. To register, please visit: SimplifyYourRetirement.com/Spencer or call: 712.332.5960.
In addition to the two course sessions, the Simplify Your Retirement personal finance course includes: an in-class workbook, a copy of retirement planning guides: 10 Steps to a Successful Retirement, and 15 Questions to Ask about Your Social Security Benefits. Tuition is $59 and includes all course materials. Couples may attend for a single tuition cost.
One of the most difficult challenges for many retirees is developing a distribution strategy from their retirement assets. If you’re like most retirees, you’ll need some level of income from your savings and investments. You will likely have Social Security income and may even benefit from a pension. However, it’s likely that you may also need income from your savings.
It can be difficult to know just how much to take in distributions. If you take too much, you could deplete your savings and put yourself in a challenging financial situation later in life. Take too little, and you may struggle to cover your living expenses.
A common piece of financial wisdom is to withdraw 4 percent of your savings balance each year as income. The idea is that 4 percent is a modest and manageable withdrawal amount, and that it won’t deplete your savings. Many people also use this rule of thumb because it’s simple and easy to calculate.
Are you planning to retire in the coming year? If so, this is likely an exciting time. You’re probably busy wrapping up final projects at work and planning for fun and exciting ways to fill your time after you retire.
While you may have a full plate right now, this is also a good time to analyze your financial strategy and take any outstanding planning steps. Of course, you may not know what steps you need to take. Retirement can be a significant financial challenge. It can be difficult to know what risks you may face.
Turning 70 soon? If so, the IRS may have a gift for you. It’s required minimum distributions, also known as RMDs. As the name suggests, RMDs are mandated withdrawals from your retirement account. They’re required if you own a traditional IRA, 401(k) plan or similar qualified account.
As you likely know, traditional IRAs and 401(k) plans are treated as tax-deferred accounts. You don’t pay taxes on growth inside the account as long as you don’t take a withdrawal. Also, you may have made contributions to the account with pretax dollars. That means the entire amount of your IRA or 401(k) dollars may be untaxed.
Tax time is here again. If you’re recently retired, you may be surprised to learn that taxes still play a big role in retirement. Many retirees assume that because they are no longer earning income, taxes won’t be a major expense.
The truth, though, is that taxes are often a significant expense for retirees. Many common sources of retirement income are taxable. Social Security is taxable, as are distributions from traditional IRAs, 401(k) plans and other qualified plans. Pension benefits usually are also taxable.
If you don’t plan ahead, you could find that taxes take a big bite out of your retirement budget. You may have less spendable income than you’d expected, and that could limit your ability to enjoy retirement.
Life can change quickly. Emergencies and unexpected costs can happen at any time. You could lose your job and suffer through a stretch of unemployment. You could suffer an injury or illness that results in substantial medical costs. You may experience home damage or costly car repairs. These things and more are all common challenges for many households. That’s why an emergency fund is such a critical component of any financial plan.
Unfortunately, many Americans have little or no savings. A new study found that 66 million Americans have zero emergency savings. Another study found that 47 percent of Americans wouldn’t be able to cover a $400 emergency expense without borrowing money or selling something.1
Why do so many Americans lack savings? They may struggle with debt and be unable to meet their standards. They may have a standard of living that’s well beyond their means. Or they may simply think that an emergency won’t happen to them.
It’s a dilemma for anyone approaching retirement. When should you file for Social Security benefits? The general wisdom is that it’s better to delay your filing as long as possible. The longer you wait, the higher your benefit is likely to be.
Despite the fact that waiting leads to increased benefits, most people do not wait to file their claim. In fact, nearly 90 percent of all eligible Americans file a claim for Social Security at or before their full retirement age. The most common filing age is 62, which is the earliest point at which one can claim benefits.1
Carstens Financial Group focuses on providing comprehensive asset management, estate planning and life insurance solutions. Allow us to help you secure your financial future.