Proper Retirement Planning Avoids Underestimating Care Costs

It can be easy to underestimate the amount of money needed to cover health care and long-term care costs after retirement. Without knowing exactly what care will be needed and with the costs of all types of care rising, it is impossible to know exactly how much money will be needed to cover such expenses.

According to a 2024 study conducted by Jackson National Life Insurance Company and the Center for Retirement Research at Boston College, nearly two-thirds of pre-retired individuals surveyed underestimate their expected retirement health care and long-term care expenses. The survey also found that only 27 percent of those surveyed believe they will require long-term care, yet nearly three-quarters of people over 65 are likely to need such care.

Consequences of Underestimating Care Costs

Failing to properly account for health care and long-term care costs can severely affect retirement security. Many retirees find themselves depleting their savings much faster than anticipated, forcing difficult financial and lifestyle adjustments. Some may need to rely on family members for financial or caregiving support, which can strain relationships and reduce overall quality of life.

Strategies for Long-Term Care Planning

With proper planning, you can be better prepared for the health care and long-term care costs that you will likely have after you retire. To mitigate the risk of financial strain, consider the following planning strategies:

• Understand Medicare. Medicare does not cover long-term care services.
• Understand Medicaid. In New York, Medicaid can and does cover certain long-term care services, including home care services and care in a nursing home, for those who qualify. Many individuals will not be eligible for Medicaid automatically, due to the strict income and resource limits imposed. However, a competent elder law and/or estate planning attorney can help individuals implement a plan in advance of needing services that will allow them to become Medicaid eligible in the event they need long-term care later on.
• Evaluate Long-Term Care Insurance. Traditional long-term care insurance policies can help cover costs but can be expensive. Hybrid policies, which combine life insurance with long-term care benefits, may offer more flexibility. The earlier the policy is purchased, the more affordable the premiums tend to be.
• Incorporate Health Care Costs into Retirement Savings Goals. Work with a financial planner to estimate expected health care expenses and incorporate them into a retirement plan. Consider conservative withdrawal strategies from retirement accounts to ensure funds last through potential medical expenses.
• Explore Veteran Benefits.  Veterans may qualify through the Department of Veterans Affairs for benefits that cover long-term care services.

If you would like to speak with an experienced elder law and estate planning attorney regarding your situation or have questions about something you have read, please do not hesitate to contact our office at 1 (800) 680-1717. We look forward to the opportunity to work with you.

Disclaimer: The information provided above is for general informational purposes only and is not legal advice.