Your First Wealth is Health!
As I get older, I have a much greater appreciation for my health. I eat nutritious foods and work out just about every day. Lifting weights and jogging are not things that I enjoy doing, but I sure do value the mental sharpness I feel after exercise as well as the physical strength and endurance that comes from the daily discipline. The ultimate benefits though, are the compounding effects that good disciplines have over the long haul. Truly, our health is our greatest investment into our future.
Conversely, the expense of ill health is a threat to our future in our earning years and is the greatest threat to our wealth when we are in our mature years. Sometimes even with the best of efforts, life can throw curve balls at us. When asked “What concerns you?” in the context of retirement planning, healthcare expense is one of the top three for nearly everyone I talk with.
What can you do financially to protect your income and your family's nest egg from the threat of large healthcare expenses? With your spouse, have a serious conversation playing out the following scenarios, and put a plan in place: 1) Do you have adequate health insurance coverage? Do you understand what your policy does and does not cover? 2) What would happen if either of you were to become disabled today? Do you have disability insurance or other sources of income that would replace lost earnings? 3) If either of you were to need long term care, how would you pay for it? How much does it cost?
In retirement planning, underestimating the probability and the coverage sources for long term care is extremely common. The number of people who will need care in the coming years will continue to increase as our population ages. Here are some sobering statistics:
- 10,000 per day: every day until 2030, 10,000 baby boomers turn 65 years old 1
- 37 million: The number of Americans aged 65 or older in 2005. 2
- 81 million: The expected of Americans aged 65 or older in 2050. 2
- 70% of people turning 65 will require some sort of long-term care during their lifetime 2
- Long Term Care Insurance Claims - Data from Genworth Study (2022) 3
- Youngest claimant: 25 years old
- Oldest claimant: 105 years old
- $54,000 per year: annual national median cost for a private, one-bedroom arrangement in an Assisted Living Facility (2021)4
- $ 94,900 per year: annual national median cost for a semi-private room in a Nursing Home 4
- $108,405 per year: annual national median cost for a private, one-bedroom arrangement in a Nursing Home 4
In your financial planning, it is important to know your options to pay for your or your spouse’s long-term care. Medicare may cover a limited amount of the expense. Medicare focuses on medical acute care for conditions that are expected to improve. If you are hospitalized for at least three days, require skilled nursing care for the same diagnosis within a 30-day period following your stay (in a facility that is Medicare certified), Medicare will pay for some of your expenses for up to 100 days. Medical supplemental policies are just as the name sounds: they are designed to “supplement” your Medicare coverage, also focusing on your medical needs, not your long-term care needs. Likewise, health insurance is designed to cover medical expenses, not ongoing care needs. Medicaid provides assistance for low-income individuals with limited financial resources; it is designed to help the impoverished of our society.
So, if you are not financially destitute and need care beyond what Medicare will cover, you will need to pay with either your own income or assets, or with coverage from a policy or a financial product designed to pay for long term care. Options include traditional long term care policies, life insurance contracts that include long term care coverage, and certain annuities with long term care provisions. Personally, I have been most impressed with the evolution of financial products other than traditional long-term care policies. We utilize these hybrid policies as a risk-management tool to help protect an individual’s or a family’s nest egg in case a long-term care need arises. Staying on top of current offerings over the past few years has enabled us to help more people who have assets to protect and find coverage that is appropriate for them. If you have a net worth that is worth protecting and have not investigated your options lately, I suggest you do. Consult with an independent financial advisor who is up to date on his or her long-term care educational requirements and who regularly works with clients who have larger sums of money to protect, because your first wealth is your health.
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Resources:
1 Cost of Long Term Care by State | Cost of Care Report | Genworth
LouAnn Schulfer of Schulfer & Associates, LLC Wealth Management can be reached at (715) 343-9600 or louann.schulfer@lpl.com. SchulferAndAssociates.com , louannschulfer.com or louann.biz
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.
This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.
Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value.
