Many people plan for retirement, but there are expensive surprises that can crop up around healthcare and derail your plans. Read on for 3 surprises about retirement that can cost you lots of money.
3 Myths About Retirement That Will Cost You Money
1. You’ll retire at 70. 22% of workers say they’ll wait until 70 to retire, but only 9% of retirees actually retired at that age according to a survey by the Employee Benefit Research Institute. Think about your friends and family. At what age did they retire? This is probably a more accurate picture of what the reality will be for you.
2. It’ll be all fun and games. I was recently talking with one of our staff who has a lot of experience in long-term care facilities. She said something very poignant, “Everybody plans and thinks about retirement, but you can’t just plan for retirement. You have to plan for your health.” There will come a time (generally after the age of 75) where the traveling will wind down and your health issues will increase. Will you be ready for that? You can find a great clearing house of information on this topic at the University of Minnesota Extension site, in addition to the information on our own website under Costs of Aging.
3. Medicare covers everything. Many people assume that once they are 65 Medicare will take care of all their health needs. Generally, Medicare will only cover 48% of costs, and Medicare DOES NOT cover long-term nursing care. That leaves a lot of expensive medical care and deductibles to be paid for out of your own pocket. Read more about Medicare and Medicaid here.
Life Care Planning Can Address These Issues
Life Care Planning can help address several of these myths, making you better prepared to deal with the reality of retirement.
So, you’re probably wondering, “What is Life Care Planning?”
Life Care Planning is a fairly new concept in the estate planning field that came about because people are living a lot longer these days. Estate planning attorneys realized that planning didn’t just need to be “death planning” anymore, that there is a lot that can be done within the law to make the last decades of life a little easier and less stressful.
Life Care Planning can help you and/or your loved ones get the best possible care during their last decade of life and find the best way to pay for it. Good, holistic planning also looks ahead to the various stages that your family may go through during the aging process. Each stage has its own unique goals, pitfalls, concerns, and challenges. Some families may skip certain stages; others may move forward and then go back to a prior stage as healthcare improves or declines.
No matter what your journey holds, your planning should start now by determining where you (or your loved ones) are in the planning stages, while also looking to where they might be in the coming months or years.
Here are the 5 stages of Life Care Planning.
Which stage are you or your parents in right now?
Stage #1: Healthy, but let’s look ahead for the maximum benefit.
The situation: More than 5 years until care will be needed. (This is where Life Care Planning can do the most good.)
The person is still living at home, drives, travels, handles finances, volunteers, maybe even works part-time. Hopefully it will be 10-15 years or more until care is needed.
Actions: Update the estate plan, will, and powers of attorney. Review asset titling and beneficiary designations. Consider a “nest egg trust” for future asset protection. Also, consider a revocable living trust.
Stage #2: Not as young as I used to be.
The situation: May need care or assistance within the next 5 years.
The person continues to drive, shop, and pay bills. But he or she is starting to lean on the family more for help or decisions. Increased health issues may even mean time in the hospital.
Actions: Update the estate plan, will, and powers of attorney. Consider a “nest egg trust” for future asset protection. However, beware of care needs coming more quickly than expected, which will change the legal and financial options.
Stage #3: Needing more and more help.
The situation: Needs help with meals and housework.
The senior’s memory is not what it used to be. You notice increased reliance on the family at home, or the person may be in an independent living facility with their own apartment and meals provided. The person may not drive or drives only during the day or on short trips.
Actions: Plan for looming care needs. May qualify for Veterans benefits now or, if not now, may qualify soon. Important to plan ahead for possible Medicaid benefits later.
Stage #4: Declining, but still at home OR declining but in assisted living.
The situation: Needs medical care at their own home or may be living with family. A lot of times the person has become too much for the family to handle themselves. At this point they may be in and out of the hospital.
The elderly person needs substantial assistance at home or in assisted living. They no longer drive. They need daily assistance that may include dressing, getting up, eating, using the bathroom, bathing. May need help during the day or maybe 24 hours a day. Leans on family for most, or all, legal or financial decisions.
Actions: Plan for looming care needs. Make sure finances are managed well, bills are paid on time, and help them avoid being taking advantage of by others financially. If the person is a veteran, they will probably qualify for Veterans benefits with proper planning. It’s important to plan ahead for possible Medicaid benefits later. Consider a financial plan, whether income will cover monthly expenses, and how long assets will last.
Stage #5: In crisis, either in the hospital or nursing home.
The situation: The person is in the hospital, rehab, or a nursing home. It is expected they will not be able to return home or to an assisted living facility. The next option is a skilled nursing facility.
Actions: Need immediate planning help to maximize Veterans or Medicaid benefits and protect assets. It is rarely “too late” to do anything.
Planning for retirement can be fun if you only think of the ideal situation. But reality may prove otherwise when it comes to unexpected hospitalizations or illnesses. However, by planning for reality and the challenges of retirement, you can make sure that you can still accomplish your goals, whether they be maintaining independence, passing property down to your children or preserving assets for charitable giving. If you’d like to learn more about Life Care Planning, we encourage you to attend one of our upcoming workshops: How to Protect Your House and Life Savings from the Nursing Home. Click here to see upcoming dates.