The Cost of Aging
According to a study by the National Bureau of Economic Research titled Medical Spending of the U.S. Elderly, seniors ages 65 and older pay about 20% of their healthcare costs privately, with the rest typically covered through some combination of Medicare, Medicaid, and private health insurance. When considered alongside the fact that nursing homes, or skilled nursing facilities (SNF), are expensive—they can cost anywhere from $77,000 to $88,000 per year—it becomes readily apparent that simply saving for retirement is not enough.
Even the most diligent folks who have been saving for retirement for decades find that the healthcare costs of aging are often steeper than they could have imagined. The report has some additional bad news—healthcare costs double between the ages of 70 and 90, while post-retirement income does not increase during that time period. On average, healthcare alone costs $59,100 in the last year of life.
Such staggering costs can easily wipe out any plans you had for your golden years—but it gets worse. The many burdens associated with healthcare, including payment and moving seniors to nursing homes, fall to your loved ones. Every parent wants to pass their legacy on to their children. But that legacy could easily be about the financial and emotional toll of caring for ailing parents instead. With one unforeseen development—cancer, Alzheimer’s, a sudden injury—decades of hard work could be wiped out in an instant.
However, healthcare does not have to wreak financial havoc on your retirement if you plan properly. The first step towards financial freedom in your golden years is research. No one can hit a target they can’t see, so blind estimates about the cost of nursing homes will be futile. It’s never too late to start developing a retirement budget, and the best way to do so is to have hard numbers regarding the cost of healthcare. Although it is an aspect of healthcare everyone hopes they never have to think about, it is especially important to consider the cost of instituting in-home medical care or living in SNF. The costs are much higher than most of us would like to believe, but sources such as the National Bureau of Economic Research can help you find those numbers.
Once you have a decent estimate of how much healthcare will cost as you age—and it’s always better to set aside more money than you think will be necessary—the next step is planning your asset protection. Without the proper estate planning documents in place, your children will be unable to receive the financial fruits of your labor even if you save sufficiently for healthcare in retirement. This happens because the government swoops in to tax all your assets upon your death, and your children will receive what is left over after the probate process—along with the headaches that come with dealing with bureaucracy.
Thankfully, government agencies can offer more than just headaches. Medicare is available to most seniors over the age of 65, but there may be special statewide programs that can help depending on where you live. California residents, for example, can take advantage of Medi-Cal, which can potentially reduce the substantial 20% of all healthcare costs that seniors pay for out of pocket.
The key to Medi-Cal and to leaving your property to your children is asset protection—having an attorney set up your paperwork in a way that allows you to take advantage of Medical without having to forfeit your property in the process. Through research, proper budgeting, and consulting the right professionals for assistance, healthcare does not have to destroy your legacy. This meticulous planning is prevention in lieu of a cure—and, as we all learn when we get older, prevention is best. Please contact our office to discuss options for you or your loved ones
All materials have been prepared for general information purposes only to permit you to learn more about our firm, our services, and the experience of our attorneys. The information presented is not legal advice, is not to be acted on as such, and may be subject to change without notice.