Adequately planning for Healthcare costs late in life is essential to every estate and wealth management plan. Late in life healthcare costs can even bankrupt families. There are several pieces and causes of this epidemic, which, from a healthcare standpoint primarily include issues arising from:
One of the most devastating aspects of these calamities, is that with proper financial management these scenarios are nearly always avoidable. A proper wealth management and plan ensures that you are protected using various financial vehicles, including proper long-term care insurance.
Long-term care can be unbelievably expensive, and with someone turning 65 today having a 70% chance of needing some type of long-term care services and support in their remaining years it should be on everyone’s minds. In fact, women’s long-term care averages 3.7 years, whereas men’s care averages just 2.2 years. This 68% increase in the amount of time spent is also an increase of 68% in final monthly expenses in end of life care. There is no doubt that we should all be preparing for the very likely scenario. In fact, long-term care itself has actually averaged a longer period over time, so the current 2.2 and 3.7 year figures are likely to increase in the coming decades amongst significant increases in cost.
If unprepared this could cost your heirs dearly, which we recently wrote about in a former blog. These costs can even leave families in the unfortunate predicament of selling family and business assets to maintain a high level of care for a loved one. In fact,the median cost for a private room in a nursing home facility in the United States is $8,365 per month! Take note that Medicaid does not pay for long-term care, nor does Medicare, unless you qualify due to limited assets and low income to qualify. Essentially, the government will only subsidize long-term care after all of your assets have been sold off.
Long-term Care Insurance is defined as “coverage that provides nursing-home care, home-health care, and personal or adult daycare for individuals age 65 or older or with a chronic or disabling condition that needs constant supervision.” The value of this insurance is clear as it maintains the level of care necessary for yourself, or a loved one, by covering costs for those over the age of 65 in need of such care. Further, it offers far more flexibility and options than Medicaid, which requires near financial poverty to qualify.
The importance of researching and investing in this insurance well in advance, which most experts and KCA recommend to begin planning in your 50s, is essential in your retirement plan to protect your assets.
Medicare and Medicaid Gaps in Coverage
Medicare was originally established in 1965 as an amendment to Social Security, and provided the first federal health insurance plan for those 65 of age and older, which translates to nearly 53,000,000 Americans aged over 65 today. This policy has provided a tremendous amount of affordable or free healthcare to our seniors, which has translated to fewer financial troubles, better healthcare, and less stress for our seniors. However, Medicare does not provide coverage for a wide variety of health care needs and costs that are not deemed “medically necessary”. According to the Centers for Medicare and Medicaid Services some services not considered “medically necessary” include:
- Custodial Care, which includes Long-term Care services and Supports
- Services given in a hospital that, based on the beneficiary’s condition, could have been furnished in a lower-cost setting
- Items/Services furnished outside of the United States
- Hospital services that exceed Medicare length of stay limitations
- Evaluation and management services that exceed those considered medically reasonable and necessary
- Therapy or diagnostic procedures that exceed Medicare usage limits
- Screening tests, examinations, and therapies for which the beneficiary has no symptoms or documented conditions, except for certain screening tests, examinations, and therapies
- Routine Physical Checkups
- Certain Eye Examinations, Eyeglasses, and Lenses
- Hearing Aids and Examinations
- Certain Immunizations
- Dental Services
- Services not called for based on the diagnosis of the beneficiary (for example, acupuncture and transcendental meditation)
- Items and services administered to a beneficiary for causing or aiding in causing death
Without proper financial planning these services and their accompanying expenses can cost you dearly if you are not properly insured and prepared for these essential services for your overall health and end of life level of care and treatment.
Early retirement due to Catastrophic event, illness or disability
Although even the most prepared individual may have their future planned perfectly, devastating unplanned or unexpected events are always a potential. Many plan to retire at a certain time to ensure their goals, and needs, are met in retirement. However, a catastrophic event, be it a disability or illness, can wreak havoc on those plans.
Regardless of desires, a plan must include these unforeseen circumstances. In fact, it was recently reported 18% had to leave because their health negatively impacted their ability to work, while 9% simply lost their job and could not find another.
Troubles, such as when to draw savings from your IRA or 401k, Social Security, and maintenance of insurance coverages is essential to defending your assets and lifestyle, regardless of the future.
Developing a Plan of Action
Comprehensively, there are many considerations to make regarding all of the unforeseeable and unavoidable expenses often associated with retirement and moving into your golden years. However, with proper financial planning and wealth preservation strategies with a highly-qualified team of professionals, which include, but are not limited to, wealth management, estate planning and insurance management a nearly stress-free retirement is within reach.
At KCA Wealth Management our mission is to be there every step of the way in supporting the members of our community with the financial and educational resources they need and deserve to prosper in retirement.