This expense could deplete your retirement nest egg. Are you ready?
It’s no secret that retirement can be a costly time in life. With housing, health care, and tenure, you may find that you are spending more money than you expected during your retirement years. And for this reason, it is important to retire with a good amount of savings.
But there is one other big expense in the life of the elderly that could catch you completely off guard. And if you’re not careful, it can potentially deplete your retirement savings and leave you woefully strapped for cash.
Prepare for long term care
American men who turn 65 in the next few years will need an average of 2.3 years of long-term care, reports Medicareguide.com. For American women, this estimate is 3.2 years.
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Meanwhile, American men who turn 65 in the next few years will spend an average of $ 142,000 on long-term care, while women will spend $ 176,000. But unfortunately Medicare will not cover long term care. And unless you come into retirement with a very solid nest egg, you could easily reduce your savings balance in an effort to meet that expense.
So what is the solution ? It could come down to long term care insurance.
Long-term care insurance can significantly cover costs like nursing home care, assisted living and home help. And while this insurance itself is not cheap, in many situations it can pay for itself and more.
The ideal age for taking out long-term care insurance is in your mid-fifties. At this age, you are more likely to get a reasonable premium rate based on your age and health. At the same time, you don’t sign up to pay those premiums for too many years.
The American Association for Long-Term Care Insurance reports that the average 55-year-old man will spend $ 1,700 per year on premiums, while the average woman that age will spend $ 2,675 per year. Meanwhile, the average cost for a 55-year-old opposite-sex couple is $ 3,050.
That said, long term care insurance rates can vary and depend on factors such as location and health. If you are a 55 year old male who is overweight and smokes, you are likely to pay more than a fit male this age with no known health issues or risks. Either way, it pays to shop around for different insurers before choosing coverage.
Another thing you should know is that if you have funds in a Health Savings Account (HSA), you can use that money to cover the premiums for long term care insurance. This, in turn, could ease that burden.
While the thought of paying for long term care insurance may seem daunting, the cost of your premiums can be paltry compared to what you spend on actual care. Suppose you and your spouse end up spending $ 3,050 a year in long-term care premiums as a couple for 30 years. That’s $ 91,500 – a lot of money. But if you both end up needing the level of care estimated above, your total rises to $ 318,000 – more than three times that. When you compare these numbers, long term care insurance reads like a no-brainer.
Of course, such insurance might not cover all of your fees on an annual basis. But that could cover the bulk of them. And if you’re worried that a long period of long-term care could lead to financial ruin, then purchasing insurance is a great way to give yourself some peace of mind.