Healthcare in retirement is becoming a focal point for financial advisors and their clients. Many people are concerned about a strategy of dealing with increasing costs and reduced benefits in their healthcare and how it will affect their retirement income planning. Handling expenses related to healthcare are a big concern for many baby boomers in particular.
A recent AARP poll of 1,331 voters over the age of 50 found that 53 percent are concerned about incurring health expenses they cannot afford, making the topic one of the top five worries for this age group. The participants included 536 baby boomers, 59 percent of whom said the economic downturn has meant they expect to rely more on Social Security and Medicare than they did in the past. Another study from Fidelity Investments found that a 65-year-old couple retiring this year will need $240,000 to foot out-of-pocket costs not covered by Medicare. The census on this study assumed the husband would live to 82 and the wife to 85.
The life insurance industry study a few years back stated that with a couple age 65 that were non-smokers, one would be alive until age 92. With these facts and rising costs, it is most important for financial advisors to focus not only on accumulating assets for retirement, but making it a priority to prepare for health care expenses as they continue to be a growing issue.
Since Obamacare started in 2008, seniors on Medicare have experienced a continued increase in costs for not only their Part B premiums, which have increased about 300 percent in four years, but increased co-payments and reduced benefits for Part A and Part B of Medicare.
Since Medicare only covers about 80 percent of medical expenses, a supplemental plan is necessary. Due to the continual reduced benefits from Medicare since 2008, the supplements have to increase the benefits to cover the balance of costs. Providing the additional benefits result in increased premiums. Supplemental insurance before 2008 and Obamacare only increased the premium every five years after age 65. Now, the premiums for supplemental coverage increase annually, because Medicare is reducing benefits annually.
Another concern for seniors is Long Term Care insurance. Medicare only covers 100 days in a nursing home. Since we are living longer, the need for LTC must be addressed when addressing your retirement planning needs. Many people donâ€™t realize that when you stop getting better in a hospital, medical insurance stops, and you are moved out into a nursing facility for care. And, you donâ€™t have to be a senior to need LTC. You could be disabled due to an accident or illness at any age and not be able to perform the Activities of Daily Living, (ADLs).
If you have a comprehensive LTC policy, it will cover both nursing home and home care as well as other potential needs. The latest statistics state that 70 percent of individuals over age 65 will have the need for long term coverage. LTC insurance is like life insurance â€“ it will be less expensive the younger you are when purchased. Also, you will be guaranteeing your insurability to purchase coverage while insurable at a more preferred rate. In addition to planning for the funding of increased medical care, good planning will also include research and provide long term care coverage options in a balanced retirement planning program.
Jim Lentini, CLU, ChFC, IAR is president of Lentini Insurance & Investments, Inc. LII has provided insurance and retirement planning since 1964. He can be reached at 661-254-7633 or www.Lentiniiandi.com.