Saul Simon

Sooner or later, the topic of health care and how to pay for it during retirement comes up when Jamie Jordan meets with her clients. This is a recent development for Jordan, a financial planner with a focus on long-term care insurance with Lincoln Financial Advisors in Williamsville, N.Y. “Just two or three years ago, it wasn’t part of most of my initial conversations with clients,” she says. “Today, this is something more people are worried about." <br />
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Decline in Corporate Coverage </strong><br />
There’s good cause for concern. Much has changed in terms of where people get their health coverage in retirement. A fundamental change in the employer-worker relationship is probably the most significant factor. “We can’t count on employers anymore,” says Jordan. “A lot of people used to retire and would have a defined-benefit pension and health care paid for in retirement. Some companies still do pay for it, but they’re getting fewer and farther between.” <br />
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With no guarantee of employer-provided health insurance in retirement, people now need to plan and save for their own coverage. But the rising cost of health care is making that a daunting task. Indeed, costs are increasing almost twice as fast as inflation, and retail prescription prices are spiking up even faster, according to the National Coalition on Health Care. <br />
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Jordan recently worked with a 52-year-old executive devising a financial plan based on varying retirement ages. If the executive retires at 62, for instance, her health care costs would be huge, and likely to increase over time. “If she were to retire in 10 years, I would have to start her with $7,000 a year to cover health care expenses,” Jordan says. “Then, we would boost that by 7% every year going forward through retirement. That takes care of doctors, hospital visits, and the Medigap-type plans that seniors can get that would cover co-payments and deductibles.”<br />
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It’s crucial to assess and plan for your health care options. Take a look at what health care coverage, if any, you can expect once you retire, says Jordan. “Part of the planning process is to look at the benefits you have now and the benefits you may or may not have as you go forward into retirement,” she says. <br />
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In some cases, you may need to read your entire employee-benefits book to assess your options. When calculating your long-term health care costs, you should consider your income and expenses and determine how long the money will last, says Jordan.<br />
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Health Savings Accounts </strong><br />
A realistic view of how much health care will cost you in retirement necessarily affects your overall financial plan. In some cases, when there is no coverage from an employer, you need to save even more to cover these costs. This prospect can affect how you invest, as the need to accumulate more money to pay for health care may prompt you to take a more aggressive investment approach. <br />
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An increasingly popular tool is Health Savings Accounts, which are tax-advantaged accounts that are available to people who are enrolled in high-deductible health plans. “These high-deductible plans cost less,” says Jordan. “The complementary HSAs help people meet that high deductible.”<br />
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<strong>LTC Insurance </strong><br />
You should also consider if long-term care insurance might play a role in your financial strategy. This has become particularly important as baby boomers start retiring en masse. “Boomers are fiercely independent and don’t want to burden their families,” says Jordan. “Long-term care insurance can be a cost-effective way to help you stay at home as long as possible.” <br />
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While long-term care insurance can be a way to preserve your lifestyle and your assets during retirement, it’s something you need to plan for and incorporate into your overall financial calculations. <br />
It’s important to know about the difference between health care and long-term care insurance, Jordan stresses. Long-term care insurance may pay for a home health care aide to come to your home or for room and board at an assisted-living facility or nursing home,” she says. “It doesn’t pay for doctor visits. You don’t cancel your health insurance when you get long-term care insurance.” <br />
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<strong>Talk to Your Financial Planner About:</strong><br />
•       Calculating your prospective health care costs. <br />
•       Whether health savings accounts or insurance can play a role in your plans. <br />
•       The impact of health care costs on your overall financial picture.