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Gary's Weekly Finance > Bringing Peace Of Mind To Your Future Health Care

Bringing Peace Of Mind To Your Future Health Care

4/25/2017 2:22:19 PM by Jeff Cutter Edited for Gary Scheer Leave a Comment
When I was younger, my mother used to joke about wearing a “little black pill” around her neck when she got older, so that when she couldn’t care for herself any longer, she could take the pill and slip away peacefully into the night. She would always say, “Seventy-five years on Earth seems like a good number. Yup, I will take the little black pill then.”

We, as parents, never want to become a burden on our kids. We don’t want them to have to care for us, or pay for someone to care for us, or to disrupt their lives for ours. I must agree. It would be nice to live a long, healthy 75 years, and then just slip away painlessly and peacefully, with no financial stress—but this isn’t what will happen to most of us.

Oftentimes, aging is out of our control, as are many future health issues related to that aging. But what we can control is the financial stress of those health issues. When I work with people planning to enter retirement, we talk about anticipated expenses, to ensure they have the money to cover those expenses. I will tell you what I often tell those folks: excluding the cost of health care from your post-retirement budget is one of the most critical mistakes people can make in their planning.

Healthcare expenses in America are unpredictable on both an individual and societal level. Legislation may or may not affect future costs, so I like to overestimate this future cost whenever possible. Unfortunately, many people planning their retirement do not take into account certain healthcare expenses (either consciously or subconsciously); expenses related to things such as hearing aids, dental work, the possibility of retirement homes and assisted-living facilities. And many of those costs are out-of-pocket, which means they can put a severe dent in a retiree’s pocketbook. So, when planning your retirement and structuring your investments and target figure, it is important to take these things into account.

You might be thinking, “Yes, but that’s why there’s Medicare.” Sure, Medicare does pay for certain healthcare expenses for qualified people ages 65 and older. In fact, Medicare can help with expenses related to doctor visits, hospital stays, prescription drug expenses and certain other healthcare-related expenses—all things that routinely come to mind when you think about health care.

The problem is that there is a large, and very dangerous, gap between what is covered by Medicare and the healthcare costs that most retirees incur. One of the most commonly overlooked expenses within this gap is the cost of long-term care.

The challenge is that there is often a daily copay for a nursing home stay, often more than $150 a day, and second, there are quite a few hoops to jump through to qualify for that “benefit.” The same situation applies to home health services as well. Some Medicare recipients will qualify for up to 100 home visits after a stay in the hospital, but those visits must be for “skilled” care, rather than to merely assist with activities of daily living, which is the help that most seniors usually require. So, again, if the need for home health services does not meet certain criteria, Medicare will not cover the costs of those home visits.

Now, some options do exist to cover these gaps in Medicare coverage. One notable option for the issue I noted above is long-term care (LTC) insurance, specifically, asset-based long-term care insurance. With asset-based LTC, there are no monthly premiums, per se, as there are with traditional LTC policies. Rather, there is one initial, lump-sum “premium.” These policies can be tricky, so I recommend you speak with a qualified retirement specialist to find out if this type of policy is best for you.

But even beyond preparing for the future costs of health care, it is also important to plan for the non-financial aspects of your future health care, which can often involve some uncomfortable discussions with loved ones.

It is no secret that incapacity can strike anyone at any time. Advancing age can bring dementia, Alzheimer’s disease, and other cognitive impairments; not to mention, a serious illness or accident can happen suddenly at any age. Even with today’s medical advancements, it is entirely possible that many of us will become incapable of handling either our medical affairs or our financial affairs. Planning ahead can ensure that your healthcare wishes will be carried out, and that your finances will continue to be competently managed.

In order to make sure your healthcare wishes are carried out, make sure you have a validly executed healthcare proxy. This is a legal document that allows your designated representative to make medical decisions for you, in the event that you are unable to communicate with your physicians.

You have a few options available to make sure that your property and financial affairs are managed correctly in the event of your incapacity. Those options include establishing a revocable living trust, preparing a durable power of attorney (DPOA), and placing property in joint ownership. A revocable living trust allows you the opportunity to establish terms under which a trustee will manage the trust’s assets. A DPOA gives an agent the authority to make financial decisions, and certain forms of joint ownership give authority to the other owner(s) to make decisions for all owners. In fact, in many cases, a combination of all three solutions can be the most effective strategy.

Retirement is supposed to be the best time of your life, and it can be, if you prepare for it properly. Unfortunately, however, the good times don’t last forever. As I mentioned above, many of us will become incapacitated at some time before we meet our maker. Ensuring that you have prepared for that possibility can provide both you and your family valuable peace of mind during difficult, emotional times.
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