What will be your biggest financial challenge in retirement? Will it be trying to protect your assets and avoid market risk? Or perhaps you’re worried about managing your spending so your funds last through your lifetime. Maybe you’re concerned about taxes or keeping up with inflation.
For many seniors, the biggest challenge may be long-term care. Long-term care is extended assistance with basic daily activities such as eating, bathing and mobility. It may include a medical component, such as administering drugs, or it could simply consist of help with day-to-day tasks.
Long-term care is often provided either in an assisted living facility or in the home by family members or home health aides. The U.S. Department of Health and Human Services estimates that today’s 65-year-olds have a 70 percent chance of needing long-term care at some point. It’s usually needed for a few years, but nearly 20 percent of those who need care require it for more than five years.1
Is retirement approaching soon? If so, now may be the time to make your final planning decisions, such as when to file for Social Security benefits or how much income to withdraw from your retirement accounts. You’ll also want to decide when to file for Medicare and which type of coverage to select.
Medicare is a valuable benefit for retirees. You’ve probably paid into the Medicare system for much of your career. Medicare is partially funded through a payroll tax on all American workers. After you retire, Medicare provides funding for a wide range of medical services, including hospitalizations, doctor visits and even prescription drugs.
You may find the Medicare system complex and difficult to navigate. There are many different types of coverage, so it’s important to consider your needs and objectives. These decisions are important because they impact your health care costs and your financial stability in retirement.
Long-term care: It’s the elephant in the room for many retirees. According to the U.S. Department of Health and Human Services, today’s 65-year-olds have a 70 percent chance of needing long-term care at some point in the future.1
Long-term care is extended assistance with basic daily living activities such as eating, bathing, dressing and mobility. It’s often provided in a facility, but it can also be offered in the home via a private nurse or home health aide.
According to a 2017 Genworth study, the average cost of a room in an assisted living facility is $3,750 per month. In-home care may actually be more costly. The average monthly cost of a full-time home health aide is more than $4,000 per month.2 If you aggregate those costs over several years, it’s easy to see how long-term care can quickly deplete your retirement assets.
Compounding the challenge is the fact that Medicare usually doesn’t cover long-term care expenses. It may partially cover a stay in a facility that’s related to a surgery or other medical procedure. However, that coverage is often very temporary. Medicaid will usually only cover long-term care if you have few assets and little income.