The 1 Retirement Expense You Can’t Afford Not to Plan For

In the course of planning for retirement, there are some larger expenses that might hit your radar, like housing, rising property taxes, and healthcare. These are things most people know to budget for. But there’s one expense that seniors tend to overlook — long-term care.

You might assume that long-term care is a service that’s covered under Medicare, but that’s not the case. The reason? Medicare will only pay for services related to an actual injury or illness. If you break your hip, Medicare will pay for your rehab, whether it happens at home or at a facility.

Long-term care, however, is often custodial in nature. If, as you age, you begin to need help with everyday living tasks, like getting dressed, bathing, and preparing foods, that’s not considered a medical issue, and so it’s not something you’ll generally get coverage for under Medicare.

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Rather, seniors are often forced to foot the bill for long-term care themselves. And that’s an expense that could end up bankrupting you if you aren’t careful.

What will long-term care cost you?

There’s no preset amount you can really budget for when it comes to long-term care. That’s because the cost at hand will hinge on factors such as the type of care you need and the amount of time you need it for.

But if you want to get a sense of what long-term care might cost you on a yearly basis, here’s how the numbers look for 2021, according to recent data from Genworth:

Home health aide — $61,776
Assisted living facility — $54,000
Nursing home — $94,900 for a shared room and $108,405 for a private

Keep in mind that these are just averages. In some parts of the country, these services could cost a lot more. That’s why it’s so important to plan for long-term care rather than wing it or assume you won’t end up needing it.

How to save and prepare for long-term care

The more money you bring into retirement, the easier it’ll be to cover the cost of long-term care should you end up needing it. There are different accounts you can tap to cover long-term care expenses. Your IRA or 401(k) plan, for example, is what you might rely on to pay for everyday expenses. If you pad your retirement account, you might have enough money to cover long-term care, at least to some degree.

It also pays to put money into a health savings account (HSA) if you’re eligible. You can carry those funds into retirement and use them to pay for the care you need.

At the same time, it’s a good bet to sign up for long-term care insurance at some point in your 50s (ideally, by your mid-50s if your goal is to snag a more affordable rate on your premiums). While you’ll obviously spend money on a policy, the coverage you get could more than pay for itself, especially if you end up needing care for an extended period of time.

But you don’t want to wait too long to secure long-term care coverage. Once you reach your 60s, it gets harder to qualify for health- or age-based discounts.

Long-term care is an unavoidable expense for many seniors. Be sure to plan for it well in advance so it doesn’t destroy your finances later in life.

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