In the course of retirement planning, workers need to factor in various future expenses. These include housing, hobbies and other pastimes, and healthcare.
Now it's hardly a secret that medical costs tend to increase with age. And it's a fairly well-known fact that healthcare coverage under Medicare is by no means free, so it's important that workers set aside money to cover their future medical bills whether by padding their 401(k)s and IRAs or funding health savings accounts.
But one big misconception about Medicare is that coverage is all-encompassing. That's hardly the truth. Not only does Medicare not pick up the tab for common services like eye exams and dental care, but it also won't cover a major expense that can wreak havoc on seniors' finances — long-term care. And the sooner you're aware of that, the sooner you can make a plan so you and your loved ones aren't stuck with astoundingly high costs.
Avoid a financial shock
It's estimated that 70% of seniors will wind up requiring some type of long-term care in their lifetime, and the costs could be astronomical.
Last year, the annual national median cost for an assisted living facility was $54,000, according to Genworth. But that's just the median cost, and in some parts of the country, assisted living costs a lot more.
Then there's nursing home care. The annual national median cost for a private room last year was a whopping $108,405. And while home health aides come at a lower price point, the annual median cost of that service last year was $61,776.
Now you might think that if you wind up needing long-term care, you can simply look to your Medicare plan to pick up the tab. But it's important to know that Medicare will generally not cover the cost of long-term care, largely because it won't pay for custodial care or help with everyday living.
What Medicare might pay for is in-home care or nursing-facility care following an accident or illness. But there's a big distinction between that and custodial care — one that often leaves seniors and their loved ones on the hook for extraordinary bills.
Boosting your savings is one way to cover the cost of long-term care. But an equally important move to make is exploring your options for long-term care insurance.
Workers are commonly advised to start applying for this insurance around their mid-50s. Delaying those applications often means getting stuck with higher premium rates.
Now long-term care insurance isn't perfect. Some policies only offer limited coverage, and there's a big expense to bear in securing a policy. But when you look at the numbers above, it's easy to make the case that putting long-term care insurance in place is an essential step toward protecting yourself and your family financially.
In a recent survey by HGC Secure, only 10% of respondents said they have long-term care coverage. Granted, that was a limited survey of 402 people ages 40 to 64, some of whom are too young to put that sort of insurance in place.
The point, however, is that come your mid-50s, long-term insurance should really be on your radar. Although it's an expense you might think you won't bear, the reality is that you're more likely to need some type of long-term care than not.
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