Our clients have always had one goal in mind: to cover their financial bases so that their retirement years can be spent on the things they worked for and even sacrificed earlier in life. Whether it’s travel or building a yacht to sail the world, we all are focused on those glorious years that don’t include bosses, rush hour traffic and mortgage payments. While those core goals haven’t changed, the worries have. Many, even those who have diligently saved over the years, still worry about growing healthcare costs. Specifically, they worry that one catastrophic event, such as the need for surgery and a long recovery period, will cut deeply into their savings.
Recently, Legg Mason released a survey of 500 investors, all considered affluent with at least $200,000 in investment assets. The vast majority, 88 percent, were confident in their efforts of saving enough to cover retirement. Their worries were growing, though and include four big concerns, the first being a single event, medical or otherwise, that would threaten their savings. Up next was the fear that they would outlive their savings followed by a loss of faith in the government and its promises and finally, lowering interest rates on their investments.
Taking it a step further, a full 60 percent say they are “terrified” of the uncertainties associated with healthcare and specifically, the new Affordable Care Act. The same number of participants say they don’t know who to turn to with these specific worries. They felt their advisors would not be able to provide guidance since they focused on investments and savings. Additionally, a smaller portion say they felt their estate planning lawyers would be able to help them with coordinating their end of life decisions, such as their wills and powers of attorney. They agreed that their attorneys could provide assistance in insurance considerations, including Medicaid and Medicare; however, they weren’t sure they would be able to provide guidance on matters such as private insurance or long term health planning. Interestingly enough, for those who had worked with both or either their financial advisors or estate planning lawyers say they wish they had done it sooner. Two thirds say they found answers after speaking with their lawyers regarding health care costs in retirement.
There exists a much bigger problem, though and one no one anticipated before the survey. When asked how much, during their retirement years, they expected to pay out of pocket in healthcare costs on an annual basis – for both themselves and their spouse, the average answer was $4,300. Let’s say you live thirty years after retirement. That means you would pay, for both you and your spouse, $129,000. The truth, according to Fidelity Benefits Consulting is that a 65-year-old couple retiring this year is expected to need roughly $220,000 to cover medical expenses throughout their retirement. Note: none of this includes the costs of a potential nursing home stay or prolonged serious illness, which could increase the costs significantly.
We encourage our clients to consider long-term care insurance, which can help considerably with nursing home costs, extended hospital stays and other expensive medical needs. Of course, your age plays a role in what kind of premiums you might pay, but the coverage can help protect what you’ve worked so hard to provide for you and your family. With healthcare costs increasing approximately 4.9 percent annually, the Congressional Budget Office reminds Americans that at this rate, healthcare costs could double every fifteen years. Make no mistake: we’re living longer, which means many of us will see our healthcare costs double at least once.
The medical advances are impressive, but expensive. While insurance and Medicare, Medicaid and/or VA benefits can help, even a combination of these aren’t the proverbial “cure all”. Of course, not all of us will need surgery or a nursing home, but the importance of planning can’t be stressed enough. Knowing you’ve put those protective mechanisms in place can only make your retirement years that much more enjoyable.
To speak with an Estate Planning Attorney about these issues and more, contact Zimmer Law Firm today at 513.721.1513.