GUEST COMMENT: Why retirement planning should include senior care

Thanks to healthy lifestyles and advancements in medical care, we’re living longer in retirement than ever before.

According to the U.S. Census Bureau, the average length of retirement is 18 years, with the average age of retirement at 63 for women and 65 for men, with minority groups retiring at slightly earlier ages.

While it would be nice to live out our golden years in good health, the odds are against us. About 70% of seniors will need some type of long-term care. According to the National Center for Health Statistics the annual median cost of an assisted living facility is $51,600 a year or $4,300 a month.

By 2030 the cost is expected to rise to $11,000 per month and by 2040 those costs are expected to reach $15,000 per month. According to a study by the U.S. Department of Health and Human Services, on average seniors will have to pay over $100,000 out of pocket on long-term care expenses in the coming years.

As we look ahead to retirement, it’s important to take these factors into consideration. Are you prepared to support yourself for 15 to 20 years? Do you have what you need to pay for assisted living, memory care or long-term health care?

As business leaders and owners, are we helping our employees plan for their future?

Starting early

It’s never too early to start thinking and planning for your retirement. Those in their 20s and 30s should focus on growing their retirement savings as much as possible.

Historically, that money has shown significant compounded growth for decades. People in their 40s and 50s should consult with a Certified Financial Planner to see if they’re on track to meet their retirement goals and what adjustments might be needed.

Including senior care in retirement planning

A comprehensive financial plan should address the possibility of needing long-term care. We often see adult children caring for their aging parents in their own homes, however this is not always an option. Complex medical needs, safety concerns and other demands may make it impossible for loved ones to be cared for at home.

Planning for long-term care is especially important for women, who make up over 75% of nursing home residents. Since women typically live longer than men, they often find themselves alone with no one to care for them.

As we’ve discussed, the cost for senior care can exceed $100,000 per year. This unexpected financial hit can easily derail an otherwise sound financial plan. Long Term Care (LTC) insurance can ensure that retirees receive the type of care they want, while protecting their savings.

While LTC insurance can be costly, many insurance carriers offer a hybrid LTC rider on life insurance policies that allow you to access a portion of the policy’s death benefit every month to pay for long-term care expenses.

As with other types of insurance, it’s best to buy long-term care insurance while you’re still healthy.

Important things to consider when planning for your retirement

As we’ve noted, the potential for long-term care costs in retirement needs to be considered as part of any financial plan. Also, make sure your retirement plan takes inflation into account.

For example, with inflation of 5% a year, in 15 years you’ll need twice as much money to enjoy the same lifestyle you have today.

Keep in mind, investment returns are very unpredictable, and you’ll likely experience bear markets during retirement. A solid financial plan should even out your risk over time and ensure you have the money you need in retirement.

There are also several legal documents you should have in place including a will, living will, power of attorney, and burial trust/prepaid funeral. These documents will ensure that your wishes will be carried out

Employers can help employees understand their options

Educate your employees on the benefits of financial and retirement planning and offer an incentive program with a percent match in a 401 (k) or IRA account. These retirement savings plans are crucial because Social Security alone will not be sufficient for most retirees.

Many smaller employers are not aware of the ease and affordability of establishing a SIMPLE or SEP IRA plan, which can help attract and retain good employees.

At 25, it is very hard to envision what the future will hold years down the line. Younger workers need to understand their financial future is in their own hands.

Teaching financial literacy and offering advice and guidance is a big step toward financial health and a solid future.

— Bruce Corwin is a private wealth adviser with First Kentucky Securities and Jeff Crittenden is co-owner of Oasis Senior Advisors Louisville.The information in this column is for informational purposes only, and not intended as specific tax or legal advice.