Long-term care and retirement planning are two of the biggest challenges that baby boomers must overcome now. Yet, not many know how to navigate the process successfully. As 10,000 individuals from this generation retire daily, the country is on the verge of what is being dubbed as the silver tsunami. The questions we now pose are these: are you prepared for your own long-term care and retirement needs? Have you done enough in preparation for the golden years?
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To help address these challenges, we have listed the top 10 tips and strategies that you must know before diving into this complicated world of retirement.
1. Acknowledge the Possibilities, No Matter How Grim
One of the biggest roadblocks that baby boomers face is their aversion to talking about growing older and weaker. However, this is a reality that only a handful can escape. You need to discuss all the possibilities that come with aging—age-related health conditions, long-term care needs, outliving one’s savings, and even moving to nursing homes—and you need to be thorough and open about these topics.
Moreover, you must look into our personal situation with a critical eye. Identify your financial capabilities, spending habits, and potential resources. Also, determine which health conditions may be in your future by examining our family health history and lifestyle. How much have you saved in retirement accounts? Do you know the process of claiming Social Security benefits? Do you have any vices such as smoking and drinking? Did any of your family members encounter any health conditions that might be genetic?
2. Find the Perfect Timing
There is no set age when you should begin preparing because the best time to plan for long-term care and retirement ought to be as early as you possibly can. Retirement plans should start as soon as you enter the workforce, and long-term care planning must be done even before you retire from your careers. Bear in mind that situations differ with each individual, and what works for others may not work for your needs. This is why experts have always been adamant in advising everyone to plan as early as they can.
3. Find the Perfect Location for You
Perhaps, one of the major differences that baby boomers will notice among states is the price on their long-term care services. For example, the average annual rate for a private room in a nursing in Alaska is $297,840 while the rate for the same service in Louisiana is at $61,663. As you can see, the costs of care differ substantially per state.
Moreover, in our recent post about long-term care planning for baby boomers aging solo, we highlighted the other key considerations in choosing a place. While the post targets the needs of baby boomers without children, the points still apply whether you have adult kids or not.
4. Learn about Potential Coverage Options
According to a study by the Associated Press-NORC Center for Public Affairs Research, 67% of older adults have done little or no planning at all for long-term care. Moreover, in a separate study done by the same organization, nearly 4 out of 10 mistakenly rely on Medicare to cover their care needs. This leaves a great number of older Americans ill-equipped to face the challenges thrown in their way.
This is why proper research about the available options is necessary. Medicaid, for example, covers long-term care services, but it imposes strict income limit that may require certain adults to spend down their assets to qualify. Moreover, life insurance with the long-term care rider may seem like the best of both worlds, but experts have stated that a policy trying to cover two needs often end up not covering either. Lastly, long-term care insurance provides the exact coverage that people need, but it does come with a fee.
5. Secure a Policy for Your Long-term Care
Once you have done ample research, you must take proactive measures in securing coverage for long-term care. If your assets and health fit the qualifications for Medicaid, then you have to study the application process as early as now.
If you have assets and savings you wish to protect, then you would find more advantages with a long-term care insurance policy. These not only provide the way for you to keep your other resources intact, but it also helps you maintain your independence by keeping you from relying on family members for the care.
6. Find the Benefits that Fit Your Needs Specifically
You have to set up your policies to target your specific needs, but you would have to learn about the options in order strategize effectively.
For example, individuals can age in place using their policy if they know how to maximize their home care benefits. Moreover, those who are more likely to receive care at home can choose the option that allows them to use their benefits to pay their family caregivers. You have to know what you want, and then you have to create a plan that will help you achieve your goal.
7. Plan for and with Your Spouse
Remember that long-term care needs have the power to affect the family, especially the spouses. Research indicates that women need care services longer, but they also live longer. This means that women typically become the care provider of their husbands, yet they are often left without partners when the time comes that they need the care that they provided. Furthermore, women are left with little resources because a big portion of the couple’s nest went to her husband’s needs.
This is why your spouse must be a significant factor in planning. Look into options like Shared Care. This allows couples to combine their coverage into a bigger pool of benefits that they can both access when the occasion calls for it.
8. Identify Your Retirement Income and Needs
As determined by a recent survey by Merrill Lynch Finances, the average cost of retirement has increased to $738,400 with approximately $260,000 going to healthcare costs. However, individuals who are accustomed to high incomes would typically spend more than this amount.
Moreover, Social Security—the income source that millions or Americans are relying on— is becoming less reliable. Currently, the average American retiree receives $1,360 a month. As you can see, the amount barely covers the essentials. This is why you must know where you stand when it comes to your finances.
9. Settle Debt as Early as You Can
Statistics show that the average household is indebted by $134,643. This is not the kind of financial drawback you want to bring with you when you retire. As stated above, retirement and long-term care are enough to take a big chunk from your expenses. You do not need debt on top of that.
This is why advisors often encourage individuals to settle their debt strategically and not to create additional or unnecessary debt.
10. Ask Questions to the Right Professionals
Understandably, planning for retirement and long-term care can be overwhelming. This can lead to making the wrong decisions which you will have to address later on. This is why we urge everyone to consult the right professionals and industry experts. As unnecessary as it may seem, you have to consult with these individuals and let them help you plan for your future.
Talk to a financial advisor and see how you can manage your finances for a better life during retirement. Discuss potential investments and ask about other possible income-generating opportunities. Moreover, consult with a long-term care insurance specialist, and request for multiple policy quotations. Remember to consider all options before deciding.
Keep in Mind that…
You have to plan for your situation and circumstances, whether it is with long-term care or retirement. What works for your peers or what it is you read online may not be as effective in addressing the situations and challenges that you may face. You must have a good grasp of your preferences, potential needs, and capabilities before anything else.
However, it will also be substantially advantageous to include your family members and loved ones in the planning process. Ask for their advice, and let them help you weigh your options. After all, they may be the ones left in charge to make the decisions for you once you are no longer able to do so.
Moreover, you should not limit yourself. Plan for travel and fun because these two are also necessary for keeping your wellbeing. Yes, you have to save and be smart about your finances because retirement and long-term costs should never be taken lightly. However, keeping a happy disposition is also crucial to your health. You may even escape a few health-related roadblocks if you pay great attention to your mental health, as well.
At the end of the day, you just have to prepare for yourself and you have to do it as early as you can. Remember that being proactive about the future can never do you wrong, so talk to your financial experts and secure long-term care coverage now.
I have been thinking about looking into long-term care. One tip that I really appreciated were finding benefits that fit my needs specifically. I agree that learning about the options in order to strategize effectively is so important.
I find it awesome that you pointed out that one should save at least $738,000 in order to retire comfortably. As a car owner, my advice to fellow car owners is to find an auto shop that can help service their car even during retirement. Doing this will not only help keep the car in great condition but also be able to pass it down to the next generation of car lovers.