While planning for retirement, many investors are forgetting a very important, costly factor; healthcare. While Medicare covers a portion of healthcare expenses, retirees should not expect Medicare to cover all costs. According to Brighthouse Financial, “A retiring 65-year-old couple will need a total of $260,000 to cover medical costs throughout a 20-year retirement – and they should expect those costs to rise. In recent years, medical costs have risen more quickly than inflation – roughly 6% annually.” Without preparing for these expenses, some retiree’s medical costs may wipe out their entire retirement savings. Luckily, there are layers of protection you can add to your retirement plan to help prepare for long-term medical expenses the future.
Long-term care insurance is a policy that can cover the expenses of illness or other medical support, such as assisted living or chronic illness care, while helping the policyholder maintain their lifestyle. While each policy has unique features and qualifications, they essentially help cover healthcare costs during retirement. While long-term care policies can help protect the policyholder and their families, they are not often utilized. AARP estimates, “Only 7.2 million or so Americans have LTC insurance.” Considering the number of people that will need long-term care, this number is surprisingly low. The need for a long-term care policy not only impacts the policyholder, but their family as well. In many situations, children take on the responsibility of caring for a sick parent, forfeiting income in order to assist the sick parent. Having a long-term care policy can help relieve stress and financial responsibility from your children.
Whole life insurance is becoming increasingly popular among Baby Boomers for several reasons, including the potential ability to draw for long-term care as well as survivorship clauses. AARP states, “Unlike the older variety of LTC insurance, these “hybrid” policies will return money to your heirs even if you don’t end up needing long-term care.” Having a whole life policy can aid enrollees, as well as their families, in maintaining the policy holder’s care and comfort during their Golden Years.
As medical expenses continue to increase, the need to plan for healthcare in retirement also increases. Having a plan in place can assist you and your family during times of poor health during retirement years. Talking with your financial advisor about your situation can help determine your needs and which policy to utilize based on your situation. While no one can know exactly what lies ahead in their medical future, we can all take steps to be better prepared.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through GWM Advisors, a registered investment advisor. GWM Advisors, Southern Point Investment Partners, and Fidelity Investments are separate entities from LPL Financial