Be Prepared for Health Care Costs During Retirement

GRAND RAPIDS, Mich. - July 30, 2015 - PRLog -- Retirement can be enjoyable – but it's not cheap. Among the many expenses you'll face as a retiree, one of the biggest may be health care. An Edward Jones financial advisor can provide you with more information on meeting health care costs during your retirement years, but today keep the following in mind.

For one thing, strive to remain healthy throughout your life. Experts recommend regular exercise and a proper diet to help you feel better and to lower your susceptibility to many age-related ailments.

Of course, you can't avoid all health-related issues and the accompanying costs. In retirement, you may incur two types of medical expenses: long-term care (nursing home and assisted living stays and services provided by home health care aides) and traditional care (doctor’s appointments, hospital visits and so on). Let's look at the potential “price tags” connected to both these categories, along with some possible ways to prepare for these expenses.

- Traditional medical expenses – Once you turn 65, you can start receiving Medicare. (If you are disabled, you may become eligible earlier.) However, you'll want to estimate your medical expenses well before your 65th birthday. You can spend around $4,000 in premiums for Medicare and Medigap (Medicare supplement insurance, sold by private companies). And you could face another sizable sum – perhaps up to $2,000 or so – for out-of-pocket items Medicare doesn't cover.

So you may well need to budget between $4,000 and $6,000 per year for traditional medical costs. To help meet these expenses, you may need to adjust your investment mix to include sufficient income-producing vehicles. Also, you will need to carefully plan the percentage you can withdraw each year from your portfolio to accommodate medical expenses.

- Long-term care – In the United States, the average cost for a private room in a nursing home is more than $91,000 per year, according to the 2015 Cost of Care Survey, produced by Genworth, a financial security company. The same study found that the average yearly costs for assisted living facilities and home health aide services are more than $43,000 and $45,000, respectively. Medicare typically only pays a small percentage of these expenses, if any. How can you protect yourself – and your family – from the potentially catastrophic costs of long-term care?

You have a few options. First, you could self-insure by designating some of your savings and investments exclusively for future long-term care costs. This option could take a sizable amount of your portfolio, however. As an alternative, you could purchase long-term care insurance, which typically provides coverage for nursing home or assisted living facilities, or for care received in your home. Or, you might want to consider a special life insurance policy that allows you to use some of the policy's death benefits to pay for long-term care costs. Your individual situation will determine which of these options is most appropriate.

Paying for both traditional medical expenses and long-term care during your retirement years can seem challenging. But by planning ahead and making suitable choices, you can help turn a potential burden into a manageable task.