Health needs are a game changer for retirement planning

We know about retirement saving, but very few of us know how to protect our nest egg.

You’ve worked hard, saved and built a nice nest egg for your retirement. You were careful with your investments and didn’t invest in anything too risky. You think you’re home free and can enjoy a comfortable retirement. But there’s one risk out there that still must be attended to or it can destroy all your work. It could amount to half a million or more in expenses.

What is it? It is the cost of long-term care.

Medicare won’t cover it. Nor, will your Medicare Supplement or Medicare Advantage plan. The only way this bill is paid from savings (your retirement plan!), depending on family to be your caregivers, Medicaid (when your savings are gone) or by transferring the risk to a long-term care insurance plan.

Genworth found in a survey of 1,200 people that not having enough money to pay for healthcare or long-term care is the greatest fear adults have about aging. Fidelity estimates that the average couple will need $285,000* in today’s dollars for medical expenses in retirement, excluding long-term care.

If we add to that four years in an assisted living facility the cost becomes an additional $291,120, according to Genworth, and care in a skilled nursing facility is more than double this cost. These numbers increase on average 3% each year.

Genworth also mentioned in their study that 60% of people erroneously believed that the government would pay for their long-term care cost. They did not know the difference between Medicare and Medicaid. It’s no wonder that Medicaid is the largest payor of long-term care costs in the nation.

Healthcare will continue to be one of your largest expenses in retirement. Unlike older generations, most of us will not have employer- or union-sponsored retiree health benefits. So, healthcare costs will likely consume a larger portion of your retirement budget—and you need to plan for that.

When you think about covering long-term care costs, your goal can be to cover the entire cost or if that isn’t feasible (and for many people, it isn’t) choosing a percentage you can cover. Something is better than nothing. You’ll be surprised how much a small amount can grow with interest.

One of the best places to start is by taking advantage of employer sponsored resources such as health savings accounts, voluntary benefits such as hospital recovery, critical illness, home care and accident plans. These programs are usually portable, so if you change jobs, you can take them with you. The plans pay cash amount when you are recovering from a stay in the hospital, are diagnosed with a critical illness, etc. Then, purchase long-term care insurance for your custodial care needs.

There are two types of long-term care policies: 1) traditional, where you pay a premium and receive a monthly or daily benefit, or 2) hybrid policy, which uses a life insurance chassis and adds a long-term care rider to it. If you have any cash-value life insurance that may have served its purpose. This is an opportunity to use the cash in that policy towards paying for your long-term care hybrid policy by transferring the cash via a 1031 exchange of assets. Most carriers will help facilitate the transaction.

Patti Goldfarb is the Founder and Owner of the Employee Benefits Advisors Group. She is also a Certified Senior Advisor and licensed insurance agent working in the areas of Medicare, and long-term care insurance. She can be reached at or (201) 255-6239.

*Disclaimer: Fidelity Benefits Consulting estimate; 2019. Estimate based on a hypothetical couple retiring in 2019, 65 years old, with life expectancies that align with Society of Actuaries’ RP-2014 Healthy Annuitant rates with Mortality Improvements Scale MP-2016. Actual expenses may be more or less depending on actual health status, area of residence, and longevity. Estimate is net of taxes. The Fidelity Retiree Health Care Costs Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, Original Medicare. The calculation takes into account cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Original Medicare. The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term car.

Patti Goldfarb is an employee benefits specialist and owner of the Employee Benefits Advisors Group. She has written and spoken about healthcare reform since its passage in 2010. If your business would like a consultation, Patti can be reached at (201) 255-6239 or