Those approaching retirement need to consider many factors, but by making a few financial decisions in the beginning, you can protect yourself from the risks ahead. Start thinking about long-term care, health insurance and retirement costs before saying goodbye to your work years.
According to the US Department of Health and Human Services, 70% of Americans will need some form of long-term retirement care, with an average annual cost of $ 100,000 in the north. The big question at this point is not whether the retiree will need long-term care, but how he will afford the care he needs.
Long-term care insurance
Long-term care insurance can help supplement some or all of the long-term care costs made by Americans today. Long-term care insurance usually offers a daily amount of coverage up to a maximum annual coverage. This daily benefit can cover care in a qualified medical facility, which can otherwise be too expensive.
For Americans who want to bridge the gap between their savings and long-term care needs, long-term care insurance is an attractive option, but it comes at a price. As at-risk groups now expect a high percentage of Americans to need long-term care, the cost of long-term care insurance can be prohibitively expensive. However, according to the AARP, healthy Americans aged 60-65 are at the optimal age for shopping for long-term care insurance due to the combination of affordable monthly premiums and total premium savings over the life of the insured. Buying this coverage today can help cover the unexpected cost of a long stay.
Nursing homes and COVID: This chain had a nationally high mortality rate when the pandemic peaked.
Make a health plan
When it comes to retirement planning, one of the biggest obstacles is health insurance coverage. For most Americans, retirement health insurance includes qualifying for Medicare and purchasing a Medicare supplement plan. However, Medicare conditions start at age 65, so navigating between retirement years and Medicare conditions is a major consideration.
Before you leave your employer, understand the benefits of your employees. Few benefit plans allow employees to continue group medical coverage after they stop working. However, COBRA coverage can provide a buffer by offering at least 18 months of continuous coverage as planned by the employer. It should be noted that continuing COBRA coverage is often more expensive for an employee than their employer plan, as employers often subsidize costs.
retirement: Be prepared to spend over $ 300,000 on health care
Another option for bridging the gap between retirement and age 65 is by purchasing free market insurance. Buying this coverage is often not recommended, as premiums are likely to be high, especially for someone over 60 years of age. Those with existing conditions can be outright denied.
When considering retirement health insurance, bridging the gap between retirement and Medicare eligibility is often the biggest consideration. Understanding your benefits, as well as those provided by COBRA, is an important way to protect against unexpected healthcare costs in retirement.
Use a bucket strategy
As you approach retirement, the tides in the markets feel less like turbulence and more of a threat to your future standard of living. One way to smooth out the instability of your plan is to implement a bucket strategy in the early years of retirement.
The bucket strategy works as follows: the retiree creates two savings buckets, one long-term and one short-term. The short-term bucket finances the pensioner’s lifestyle and contains between two and four years of costs invested conservatively. The long-term bucket holds the rest of the portfolio’s assets, but is invested more aggressively. In theory, the short-term bucket is protected from market volatility, while the long-term bucket captures market profits. As the average recession lasted four years or less, the short-term bucket finances the retirement lifestyle while resisting any market downturns. A great option for creating a bucket strategy is by transferring old retirement plans to IRAs and then investing accordingly.
Like long-term care and health insurance, pre-planning retirement costs can pay dividends in the future. Long-term care needs, health insurance costs, market instability. All these things are beyond our control. By developing a strategy today, you can plan for these scenarios and ensure that they do not adversely affect your retirement.
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