Avoiding the Single Largest Risk to Your Retirement Income
American workers are retiring, and health care costs are rising. We are all feeling it, even if we aren’t ready to retire. But it’s hitting retirees harder.
Many retirees will see a reduction in their Social Security in 2020 even though payments increased this year. Why? The cost of health insurance rose faster than the increase in the cost of living adjustment for Social Security. But decreased Social Security isn’t the greatest threat. There is an even greater threat to our retirement savings that is largely being ignored. And that’s the risk of a long-term care event.
The statistics are staggering:
- $52,614: The annual cost of home health care in the United States
- $102,200: The annual cost of a nursing home (private room) in the United States
- $208 billion: Long-term care expenditures in 2015 and growing at 2.8% since 2000
- 34.2 million: Number of Americans have provided unpaid care for someone age 50 or over in the last 12 months with $470 billion of estimated value of unpaid caregivers
- 11%: Percentage of Americans who have shifted the risk of long-term care through insurance
The risk of needing long-term care is immense. And it’s nearly unavoidable. The issue is typically presented as a capital problem – you need to set aside funds to take care of a long-term care event just like you would for any other emergency.
But the real risk is cash flow and the affect that a long-term care event will have on your ability to spend money both during and, for a surviving spouse, after the event.
What are my options to overcome the risk of a long-term care event?
There are several ways to mitigate this risk in your retirement plans. It’s easy to shift this risk and enjoy a secure retirement for you and your spouse. Below are some options you should consider:
Purchase long-term care insurance
While there are fewer carriers in the marketplace today, those carriers have better experience in their portfolios. Therefore, the risk of major price increases like we saw over the past 10 years is less likely. The premiums you pay for a policy can greatly enhance your cash flow when you need it the most.
Transfer old annuities to Pension Protection Act qualified annuities
If you have money saved for an emergency in old annuities you can turn current tax-deferred growth into tax-free cash when used for long-term care expenses under an asset-based annuity. There are several carriers that shift the risk through these policies. These annuities provide leverage by using your own funds first but also providing additional funds for long-term care when your money runs out.
Secure guaranteed income
If you are not able to qualify for long-term care coverage and the additional benefits it provides, look to securing guaranteed income that cannot decrease if you live too long. Having the ability to have income during the care event and for the surviving spouse provides additional income when you and your spouse need stability.
Have a plan
No matter your financial position, speak to our coach about developing a plan to mitigate this risk and plan for income sources. It’s also important to take steps to preserve your health now. Look for ways to shelter assets and secure the financial security for your loved ones regardless of the ability shift the risk.
It Begins with a Conversation
One of the best defense strategies is to eliminate risk. In sports, victory favors the team making the fewest mistakes. The same is true with financial wins. Look to the largest potential risks to your retirement and address those first. Long-term care is one of them.
Questions? We can help.
866-551-2525
Call us to discuss options specifically for you and your family to reduce one of the greatest risks your retirement faces.
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The real risk is cash flow and the affect that a long-term care event will have on your ability to spend money both during and, for a surviving spouse, after the event.