You imagine your retirement . . . where you want to live, what you want to do, and how much it all might cost. You have a detailed budget to help plan your finances. Not understanding your risks has high-cost implications and can potentially derail your hard work. Consider these tips to complete your plan by adding a strategy and budget for your health care needs.
People of all ages are at risk of illness or injury, which naturally increases as we get older. Health issues can affect us and our families physically, mentally, emotionally and financially. The key to being prepared is to understand what can happen, insure against risk where possible, and prepare for out-of-pocket costs that might be involved.
Watch for these health-related issues and protect against the risks before and during retirement:
While many short-term disabilities are caused by accidents, long-term disability often is a result of illness and impairment. If you become sick or hurt and unable to work, you lose two things: your ability to earn an income and the source of your retirement savings. Managing a disability often adds medical appointments and travel, as well as money spent on co-pays, medical deductibles and prescriptions.
Protection: Employer group disability insurance, if you have it, will typically pay 60% of your annual salary. Will your retirement program work as intended with only 60% of your income? If not, consider an individual disability insurance policy to supplement the employer-paid one. For business owners, protect your employees and your company by adding business overhead expense coverage with the disability insurance
- Individual Health Insurance
You don’t want to get caught uninsured. You may have access to a retiree medical plan offered by your employer, or 18 months of COBRA insurance coverage. If you don’t have such coverage and you retire before age 65, you will need to purchase individual health insurance until your Medicare coverage begins at age 65. Depending on the fate of the new health care law, it may be difficult to get approval for individual health insurance if you or a family member has a pre-existing condition such as asthma, diabetes or high blood pressure.
Protection: At least a year before you retire, start to research health insurance options for yourself and your spouse, including private insurance. Understand your choices well before you need them, and be aware of deductibles, co-pays and preventive care that are included with each plan. Determine if you will qualify. If necessary, explore your state’s high-risk insurance program.
- Out-of-pocket Medicare Costs
Contrary to popular belief, you will pay health insurance expenses even when you are retired and on Medicare. Costs will depend on where you live, which Medicare and Medigap plans you choose, and whether or not you need a prescription drug benefit (Medicare Part D). Be aware of designated enrollment periods so you don’t get caught without insurance and visit www.Medicare.gov to learn more.
Protection: Plan ahead for these expenses. According to regional cost figures provided at www.medicare.gov, the average retiree could pay between $2,600 and $7,300 a year for premiums, deductibles and other out-of-pocket expenses. Sign up for Medicare during the prescribed enrollment period – three months before you turn 65 – to avoid late-enrollment penalties and coverage delays.
- Long-term Care
Nearly 7 in 10 people over 65 need some form of long-term care, according to The National Clearinghouse for Long-term Care Information. Since Medicare does not cover long-term care costs, it’s in your best interest to have a long-term care strategy in your financial plan. Long-term care services can range from assistance with activities of daily living by a home-health aide to 24-hour care at a nursing facility.
Protection: Understand the costs involved with long-term care and create a game plan for managing long-term care risk. Your long-term care payment options could include tapping the cash value of life insurance policies you may own.
- Unexpected Early Retirement
Most of us expect to work as long as we wish and accumulate retirement funds until we choose to stop. That’s a good approach when things go according to plan, but sometimes life gets in the way. A recent study by the Employee Benefit Research Institute found that half of current retirees left the work force unexpectedly, earlier than they intended to, and half of those retired due to health problems or disability.
Protection: Avoid health problems with good diet, regular exercise and sleep. Stay active and live a lifestyle that will keep you strong and healthy longer, and start early to set aside retirement funds so you’ll have enough if you have to retire early.
Don’t get derailed by unexpected setbacks. Much is known about loss of income because of unemployment, but unexpected health care events can have an even greater impact. A sound financial plan will help you prepare for life’s surprises and insure against them when possible. A financial representative can help you evaluate your family’s specific needs and develop a customized plan that works for you. Call today.