Quote:
Originally Posted by webmeezer
Something I don't see mentioned and is a huge expense later in life is both medical care both for yourself and possibly parents. This can be a very, very large expenditure that quickly eclipses your current retirement budget.
We've done 2 parents, 1 relative and 1 friend and it's pretty scary how expensive it is for health care later in life. Medicare and Medicaid (US) can provide some relief, but you need to have planned out your income/savings many years prior to needing help (5 years for Medicaid). This is assuming they're still both subsidizing at the same levels as now.
Assisted living & Nursing care can easily run upwards of $5-10K per month (unsubsidized) with numerous add-ons as the care increases. Additionally, there's your time (which can be substantial) to either care or monitor either a spouse or parent.
We've allocated all of the proceeds from our home/property (in a trust) to be used for our later health care (~$500K) and I'm not sure that will be enough. That/this time of life is where it's good to have had children  |
Not to mention that Medicaid is difficult to qualify for benefits. Anyone counting on Medicaid in retirement should probably not be thinking of retirement unless physically unable to work. There are Medicare supplements but they can be complicated and expensive. Healthcare costs and long-term care costs in retirement are serious issues to plan for.
We looked into long-term care insurance and found 2 kinds. One you pay a lump sum between $50K and $100K upfront (or finance over 10 years) and the other has lower monthly premiums (that are not locked in and could increase) that you pay until you trigger benefits or die. In both cases, you receive fixed amounts of benefits for a fixed period of time (subject to some features like inflation adjustment and one spouse using both benefits if the other doesn't use their benefit in some plans). In both cases you are subject to long-term financial health of the insurer (like life insurance), running out of benefits and potential need to battle over claims when you need to tap into benefits (like health insurance).
We ruled out the monthly premium approach since it was susceptible to increases and payments could last until death if long-term care was not needed. They claimed they do not anticipate needing to raise rates, but there is nothing contractually locking in the price. I feared paying premiums for 20 years and then seeing rates jacked up when we no longer have income from working and close to needing benefits. Clearly the premiums are counting on some people cancelling before claims are paid (like term life insurance) but not interested in going on that ride. We thought about the lump sum approach. However when you do the math, you are not really better off vs. self funding unless you need benefits earlier than expected. If you don't use the insurance a beneficiary who is still alive will get the premium refund, but no interest / earnings. There are no easy answers except accumulating as much money as you can and not worrying about leaving some behind when you die.