Retirement Risk Factor: Health Care

You might have noticed that the advertisement I usually run in this paper is different this month. I donated the space to raise awareness of an issue that’s particularly important to me: life-changing medical events. This ad highlights breast cancer, which is the most diagnosed form of cancer in Maryland and the third leading cause of cancer deaths.

Diagnoses like cancer, as you near or enter retirement, can be painful in two ways. The first and perhaps most obvious is that your retirement will now be filled with worries about your health, not to mention frequent doctor visits and potentially uncomfortable treatment regimens. But the second is in some ways equally unfortunate: being sick is expensive. And being sick for a long time can cause an otherwise solid retirement plan to fail.

Long-term care costs are rising rapidly. Assisted living facilities, which help residents with daily-life activities such as dressing, hygiene and medication management, come at a median cost of $6,650 per month. Nursing homes that provide more intensive care are even more expensive. These costs can be ruinous even to well-funded retirement plans, so it’s essential to include long-term care considerations in your retirement planning.

Go-go

Retirement generally happens in three stages, which I call the go-go, slow-go and no-go years. The go-go years come early in retirement when you’re enjoying traveling and other strenuous activities. I recently returned from a trip to Spain where I walked 13,000 steps in a day and spent 12 hours on an airplane to cross the ocean.

It was exhausting, but I loved the trip. However, I’m in my 40s. I wouldn’t want to take a trip like that when I’m 80; few would! Most people will want to have experiences like that early in retirement, during the go-go years.

Slow-go

Then come the slow-go years, in which the pace of your life begins to decrease. Perhaps you take only one trip per year or invite your kids to visit you rather than traveling to see them over the holidays. You’re still able to get out and do things, but you’re not interested in doing them as frequently as you did when you were younger.

No-go

Finally, as health becomes more of a factor, you begin curtailing travel and other activities even more. This is the stage of retirement in which costs typically increase — the median cost of a private nursing home room nationwide is nearly $10,000 per month with an average stay of at least one year! Those costs are unsustainable for all retirees but those with the most meticulously-planned long-term care retirement funding.

Fortunately, there are options beyond expensive long-term care insurance or saving an extra $100,000 minimum on the off chance that you will be one of the 35% of people who need nursing home care at some point in their lives.

One example is an annuity with a long-term care doubler. Such an annuity will double its benefit payments if you need long-term care. Depending on your financial situation and needs, it can be a good way to ensure long-term care costs aren’t completely shouldered by your retirement savings.

There are several ways to plan for unpredictable health care needs in retirement. It’s important to sit down with your financial advisor to find a path that’s right for you and your unique situation.

Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results. This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.

Jason LaBarge, financial advisor and president of LaBarge Financial

7 Riggs Avenue, Severna Park, MD 21146 443-647-4321

www.labargefinancial.com

Securities offered only by duly registered individuals through Madison Avenue Securities LLC (MAS), member FINRA/SIPC. Investment advisory products and services made available through AE Wealth Management LLC (AEWM), a registered investment advisor. MAS and LaBarge Financial are not affiliated entities.