Prevent Depletion of your Retirement Funds due to Healthcare Costs

Six out of every ten Americans worry they will become a financial burden on their families as they get older. And of affluent pre-retirees, nearly seven out of ten of them fear that even with Medicare, high health care costs could put their retirement plans at risk. Indeed, 57 percent of Americans say that they are “terrified.”

More than half of Americans say that it’s important for their financial professional to speak with them about protecting themselves and their families against the risk of unexpected health care costs – including major medical, long-term care, nursing home and hospice care – in their retirement years. 38 percent of Americans believe that healthcare costs will be their biggest expenditure in retirement.

55 percent of Americans fear their healthcare costs will consume all the money they planned to leave for their children, and 45 percent of adults with children say they would give all their money to their children so they can qualify for long-term care costs under Medicaid.

Nevertheless, only 10 percent of Americans report that they have even had a conversation about it with their financial advisors.

That’s according to the recently published Fourth Annual Health Care and Long-Term Care Study, from the Nationwide Retirement Institute.

You Can’t Cheat.

Sometimes, people expecting to need nursing home care in the near future, or who are already in nursing home care, will try to game the system by transferring assets to family members. The intent is to bring their own assets down under their own state qualification criteria so they can receive Medicaid benefits.

But there’s a problem with that: The Medicaid program was designed to provide basic care for the truly impoverished and indigent. And so with the Deficit Reduction Act, Congress elected to create a ‘lookback’ period of five years prior to the date you apply for Medicaid. Any transfers you make within five years prior to applying are effectively disallowed, and those assets considered available to spend down before you can qualify for Medicaid benefits.

So what can you do?  

If healthcare and long-term care costs in retirement are a concern for you, then you may consider protecting yourself with long-term care insurance. This insurance typically pays up to a few hundred dollars per day in benefits should you become unable to care for yourself and need nursing home or other support assistance.

Specifics vary widely by carrier, and most policies come with options like inflation protection, shared care (allowing a married or otherwise connected couple to share a combined pool of benefits, if necessary), return of premiums on unused coverage, and higher or lower daily benefit rates.

This insurance coverage effectively protects not just your retirement assets, but also your income as well: The average cost of a semi-private room in a skilled nursing care facility is now more than $80,000 per year – more than enough to devour an entire pension.

Certain tax-qualified long-term care policies also provide an important benefit: They help shelter your assets from seizure by state Medicaid authorities to reimburse taxpayers for the costs of care. Here’s how it works: If you purchase up to $200,000 in long-term care benefits from an insurance carrier, using a qualifying policy, the state will exempt the first $200,000 in your estate from seizure to pay themselves back for benefits paid on your behalf.

Long-term care planning is a vital component of your financial plan – especially if you have assets to protect, or if you want to pass a financial legacy on to your children instead of on to the state coffers.

To start the ball rolling, contact your insurance professional today.


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