Reduce Your Out-of-Pocket Health Care Costs in Retirement

​Risk management is always important, but it’s an even greater priority in retirement. Without the benefit of a regular paycheck, it could be difficult to bounce back from market downturns or costly emergencies. One sizable setback could be enough to derail your retirement plans.
 
One major risk you shouldn’t ignore in your planning is the impact of health care costs. Fidelity estimates that the average married couple will spend $275,000 on out-of-pocket health care expenses in retirement.1 That figure doesn’t even include long-term care, which can cost thousands of dollars per month and may be needed for several years.

The good news is there are steps you can take to reduce your risk exposure and protect your retirement. Below are three such steps to consider. If you haven’t yet developed your retirement risk management strategy, now may be the time to do so.

Adjust your coverage annually to align with your needs.
Medicare won’t cover all your health care costs, but—depending on your specific coverage—it will cover much of them. In its original form, it only covered hospitalizations. Over time, however, Medicare has been expanded to cover things like doctor visits, prescription drugs and much more.
 
Medicare now offers a wide range of plan options to meet different needs and budgets, especially through the Medicare Advantage program. You may be overwhelmed as you analyze your options. After all, it’s difficult to predict how your needs may change in the future.
 
Fortunately, Medicare lets you make changes to your coverage once a year. The program offers an annual open enrollment period. During this time, you can make adjustments to your coverage or even switch to a different plan altogether.

Use these periods to analyze your changing needs and budget, and to make changes. For example, as you get older, you may find that you need more robust protection with lower out-of-pocket exposure. The enrollment period gives you the chance to make sure your coverage always meets your needs.

Consider long-term care insurance.
According to the U.S. Department of Health and Human Services, long-term care will be a reality for many retirees. The agency estimates that today’s 65-year-olds have a 70 percent chance of needing long-term care at some point in their lives.2
 
Whether it’s provided in a facility or in your home, long-term care is usually a costly service. It can cost thousands of dollars per month. Also, many seniors require care for many months or even several years. As you might expect, that level of care can quickly deplete your savings.
 
However, you can use long-term care insurance to cover some or all of the expense. With long-term care insurance, you pay premiums to an insurer, and then the insurer pays your long-term care costs should you ever need assistance. Most policies cover care provided either in a facility or in the home. Some even offer death benefits to your loved ones in case you don’t use the long-term care protection.
 
If you haven’t yet looked at long-term care insurance, now may be the time to do so. You can choose the coverage, premiums and other options that best fit your needs and budget. A financial professional can help you find the right policy for you.

Keep your life insurance cash value as an emergency reserve.
Do you have permanent life insurance policies that have accumulated cash value? You may be tempted to surrender the policies and use the cash to fund your retirement. Many people purchase life insurance when they’re young and have kids in the home. In retirement, though, life insurance may seem unnecessary.
 
However, you can use the cash value in the policy to help pay for emergencies. For example, you can take tax-free loan distributions from your policy’s cash value account. The loan has to be repaid, but the tax-free distribution could help you pay for long-term care or medical bills. If you don’t repay the loan before you pass away, the balance is simply deducted from the death benefit.
 
The life insurance death benefit could also be helpful to your surviving spouse after your death. He or she may face substantial medical and long-term care bills that accumulated during the final years of your life. The life insurance could help your spouse regain his or her financial footing.
 
Ready to develop your risk management strategy? Let’s talk about it. Contact us today at Rex Financial Group. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.

 
1https://www.fidelity.com/viewpoints/retirement/retiree-health-costs-rise
2https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
17508 - 2018/3/26