What is your retirement plan missing?

“The second most important financial priority, especially among older respondents, is saving money to pay health-care costs” from a recent article. This is not surprising, considering that 70% of those surveyed said they expect their medical expenses to increase during retirement. A smaller but not insignificant number of respondents listed a related concern – long term care expenses – as a top-two priority as well.
Fortunately we have Medicare to cover the bulk of our medical costs, and part D to help with drug costs. Even with the Medicare supplements or Medicare Advantage plans most retirees have, the costs are quite well controlled.
The cost that sinks most retirement plans is the extra bill each year for between $42,000 and $96,000 for long term care services. These bills are not covered by Medicare, your supplement, or advantage plan.
Many people simply hope it won’t happen to them. Personally I feel the same way about an auto accident, but I do carry auto insurance. I also carry long term care insurance so that my nest egg does not get used up in a year or two paying for my care when my health changes. In many cases the interest on just a portion of your retirement assets can purchase LTC insurance (if you are still healthy enough to purchase it) and save the rest of the principal for fun things we would like to do in retirement.
So, why don’t most retirees have LTC insurance? Many think the government pays for long term care. They are correct in that Medicaid, a welfare program, will pay for LTC costs once you have spent down to impoverishment – how fun is that? Most people who pay out of pocket use money they had hoped to leave for heirs.
Consider this, take a portion of the retirement savings and have the interest sent to you annually to pay the premium on LTC insurance. How much will it cost? First of all, are you healthy enough to be able to purchase it? A past heart attack may not be a problem, but a sore shoulder or pending knee replacement can disqualify you. Ditto for osteoporosis, diabetes, steroid usage, or memory concerns. You can be totally healthy until your next physical when a diagnosis suddenly becomes part of your medical history and LTC insurance is not available at any cost.
Most people do not need as much insurance for this as they might initially suspect. When one of a couple needs care, there may be less vacation travel, less toys, less vehicles, and some of the dollars spent on fun can be redirected to the cost of care before LTC insurance amounts are decided on. There are also many differnt companies offering such coverage, often with very different prices. A specialist in this area can be very helpful in helping you choose appropriate coverage.
Lastly, do not forget to include an inflation protection option. $100 daily benefit today might be sufficient, but in 25 years it might be as useless as 29 cents at a gasoline pump to fill a gallon can.

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