- \ Gerard Gruber
- March 17, 2020
Getting older is a time to slow down and enjoy spending time with friends and family doing the things you love. With the hectic days of child rearing and career building in the past, getting older can be an opportunity to explore new passions and try new hobbies. But, the passage of time affects the body in different ways and presents its own set of challenges.
When you think of the issues that accompany aging, what are the first things that come to mind? For most of us, physical challenges and deteriorating health top the list. But, many of us fail to take this one step further and consider the impact our health will have on our finances—especially into our 80s and 90s.
Increasing Healthcare Needs and Costs
Because our bodies require more care as we age, healthcare costs will demand more of our budget. Likely increases in doctor’s visits, wellness examinations, treatments, and possibly even prescription drugs can put quite a strain on a fixed retirement income later in life.
According to the Bureau of Labor Statistics’ latest data on consumer spending, 13.4% of all spending in senior households goes to cover healthcare costs, compared to just 8.1% of spending across all households.
Aside from the rising need most aging American adults require, the cost of associated care has continued to skyrocket, increasing at a rate 2 to 3 times faster than that of inflation. In fact, from 1989 to 2017 [1]:
- Hospital service expenses have increased 353%
- Medical care has increased by 182%
- Prescription drug costs have increased by 178%
- Doctor services have increased by 129%.
Rising Premiums for Long-Term Care (LTC)
Of course, one way to prepare for the cost of long-term care is by purchasing a long-term care policy. However, like other life and health insurance policies, premiums escalate as the policyholder ages. Premiums not secured at a lower rate at a younger age may be out of reach for those entering their 80s and 90s since 89% of LTC claims are filed by people over age 70.
So how can older adults prepare to handle these challenges?
1. Plan Early and Revisit Often
As you begin retirement planning, you’ll want to know what Medicare will and will not cover in order to make an informed decision about your financial need later in life. For more information, read our recent article “ 5 Surprising Medical Costs Not Covered by Medicare.” As your health changes, revisit your plans to reflect your evolving needs.
2. Purchase a Long-Term Care Policy
When is the best time to purchase long-term care? While the answer will vary from person to person based on their overall financial picture, we recommend waiting no later than age 60 in order to protect your retirement savings. At this juncture, premiums rise significantly and may put more of a burden on your retirement expenses than they would have otherwise.
3. Speak with Your Family about Future Care
The financial challenges of aging don’t just affect those in need, but their loved ones, as well. In order to avoid strained relations or issues regarding your future care, be open and communicate with your family now. This could include spouses, partners, and even adult children depending on your situation. The best way to prepare for your needs is to start the conversations early.
Living a long and full life can be very rewarding, but it can also be hard to plan for from a financial perspective. Putting the proper safeguards in place can help relieve the burden on both yourself and your loved ones down the road.
Have you worked healthcare and long-term care expenses into your late life retirement plans? The Harbor West wealth management team can help. Contact us today to schedule a complimentary Discovery Call to discuss how our services can help you prepare to cover these expenses.
[1] Bureau of Labor and Statistics, Consumer Expenditure Survey 2016 (as of 04/10/19)