The Uncertainty of Future Healthcare Expenses
One of the biggest unknowns in financial planning is the future cost of healthcare. One person can prepare and then live to 95 with hardly a doctor visit. Another can be in the prime of life and receive unexpected news that results in hundreds of thousands of dollars in health-related expenses – everything from hospitals, medical trials and procedures, medical travel, assisted living, home healthcare, nursing homes, and/or hospice care. The thought of the emotional side of one’s health is a lot to take on - adding the financial implications too can be daunting.
Even though we should not lose sleep worrying about something we cannot control, it is wise to prepare for what we can do with what we know and with what we have.
First, we must confront the facts:
As a society, we are living longer. This means we have greater opportunities as well as risks to prepare for.
Statistically, as we get older, we will have more health issues and therefore more costs associated with healthcare.
Medicare Part A and B may be in place for the retirement years, but it will not cover all our costs. Most dental care, eye exams, hearing aids, and many other routine expenses are not covered under Medicare.
According to the Genworth 2017 Annual Cost of Care Survey, the national median annual cost of long-term care is:
Adult Day Care (5 days/wk) $18,200
Assisted Living (one-bedroom) $45,000
Homemaker Services (44 hrs/wk) $47,934
In-Home Health Aide (44 hrs/wk) $49,192
Nursing Home (semi-private room) $85,775
Nursing Home (private room) $97,455
Medicare helps to pay for your recovery in a skilled nursing care facility ( SNF) after a three-day hospital stay. Medicare will cover the total cost of skilled nursing care for the first 20 days, after which you will pay $170.50 coinsurance per day (this year’s cost). After 100 days, you are on your own.
Second, we must do what we can to mitigate our health costs, such as eating a balanced diet, exercising, and routine check-ups. Taking care of your health may be one of the best ways you can save money in your retirement years and it adds to your quality of life along the way. While not all diagnoses can be prevented, it’s important to manage what we can!
Third, we must put a plan in place. Even though we may not know what tomorrow holds, we can make assumptions based on family history, statistics, and consider both best- and worst-case scenarios. Maybe we cannot all put aside enough money to plan for every contingency, but we can plan for possible outcomes so that we know we have done our best for ourselves and our loved ones.
Since we are fee-only advisors, we do not place insurance coverage (which is generally commission based). We do work with our clients to create a potential needs analysis and evaluate potential solutions including self-insuring, Long Term Care (LTC) policies, Hybrid LTC policies, etc. If you have an insurance agent, we are happy to work with them. If not, we can recommend a trusted insurance agency.
The cost of healthcare is one of many topics we cover when we develop financial plans for clients. It is not one we can ignore. Cashflow, retirement planning, insurance, investments, tax considerations, employee benefits, estate planning, education costs, as well as healthcare costs all come together in developing a comprehensive plan. It will take time and work to pull all the pieces together, but it is worth the peace of mind that accompanies a working plan for your and your family’s future.