Avoid This Common Retirement Crisis

As you transition from your working years to retirement, it’s normal to feel a bit of anxiety over your plans. You run the numbers, you analyze your situation from various angles, and hopefully you’ve consulted with a financial advisor to establish reliable streams of income. But there is one potential pitfall you might have overlooked: Have you investigated the impact of a major illness or accident?

We know that the average 65-year-old couple retiring today can expect to pay $280,000 toward their out-of-pocket healthcare costs over the years. Some of these projected costs are unavoidable; Medicare premiums, co-pays, deductibles, and so on will affect everyone. Other costs, like those associated with expensive prescription drugs, or the need for professional nursing care, will vary greatly from one person to the next. If a major accident or illness occurs, you might be forced to tap into your retirement savings, disrupting your retirement income plans for years.

We know that some things are simply out of our control, and our health can be one of those things. You can hedge your bets by making healthy lifestyle decisions -and that does help- but you should also look into methods of reducing the financial cost of a healthcare crisis.

Supplemental insurance. It might surprise you to learn that Medicare does not actually cover everything retirees need with regard to healthcare. Many medications and certain types of medical equipment won’t be covered, and Medicare does not reimburse for healthcare bills in many foreign countries.

A Medigap plan, Medicare Part D (prescription drug coverage) or Medicare Advantage plan can help bridge the gaps in your insurance coverage. These options can keep your costs more manageable throughout retirement, but each has its benefits and drawbacks. Consult with an insurance professional before you take the leap into retirement, rather than simply assuming the basic Medicare plans will work for your situation.

Long-term care insurance. Medicare only pays for nursing care facilities for a relatively short period of time. If you need care for more than about a month after an accident or during an illness, you will be footing the bill for that care. Since the average 65-year-old faces a 70 percent chance of needing long-term nursing care at some point, it makes sense to either budget for this expense, or purchase long-term care insurance.

Let’s discuss your projected healthcare costs at our next meeting, so we can examine your retirement plan for potential weaknesses. Together we will weigh your options and make a back-up plan for this type of crisis in the future.