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There’s a lot to love about spring. Here in the Valley, we love enjoying every sunny moment outdoors, before summer heat rolls in.
Spring cleaning and tax season give us two natural reminders to take stock of our financial health — especially as it connects with our physical health.
We see many retirees focus only on investment performance and budgeting, overlooking healthcare and long-term care (LTC) planning as important parts of financial security.
Yet most experts project U.S. healthcare costs to grow 4-6% annually over the next decade. And the average American life expectancy is now a decade longer than it was in 1950. We think this combination of factors means it’s crucial that your health insurance and LTC strategies are in place.
This article will help guide you through reviewing your healthcare coverage, exploring long-term care options, and considering the integration of these strategies into your annual financial checkup. Whether you’re already retired or approaching retirement, taking proactive steps now can help prevent financial stress later.
Evaluating your current healthcare coverage
Medicare: Are you in an appropriate plan?
Medicare provides essential health coverage for retirees, but choosing an appropriate plan requires periodic review. We believe Spring is a great time to assess whether your Medicare coverage meets your needs. Consider:
- Original Medicare vs. Medicare Advantage: Are you satisfied with your provider choices and coverage limits?
- Medicare Supplement (Medigap) Policies: If you have frequent healthcare needs, does your Medigap plan still provide the value you need?
- Prescription Drug Coverage (Medicare Part D): Are your medications covered at a reasonable cost?
Since Medicare’s Annual Enrollment Period occurs in the fall, reviewing your coverage in the spring allows ample time to compare options before making changes. Certain life events trigger Special Enrollment Periods — like moving out of state, or losing other coverage — so a springtime review is a great practice to help you stay prepared for whatever the year brings.
Employer or retiree health plans
Check for any upcoming policy changes if you have retiree health benefits or are covered under a spouse’s employer plan. Premiums, deductibles, and covered services can shift annually, impacting out-of-pocket costs.
Private health insurance options
Private insurance through the ACA marketplace or COBRA can be a bridge for early retirees who aren’t yet eligible for Medicare. Reviewing plan updates now can help avoid unexpected coverage gaps.
Your financial advisor can help you understand the impact of your health coverage on your retirement savings, and can refer you to a trusted insurance agent for more detailed guidance about health benefits.
As a helpful resource, each state offers local State Health Insurance Assistance Programs, or SHIP, to offer unbiased advice and counseling about Medicare options. Here in the Copper State, you can connect with Arizona SHIP.
Long-term care planning can be essential
According to the U.S. Department of Health and Human Services, nearly 70% of people turning 65 today will require some form of long-term care. The costs can be staggering:
- Assisted living facility: ~$54,000 per year
- Home health aide: ~$61,776 per year
- Nursing home (private room): ~$108,000 per year
Without a plan, these expenses can quickly use up your savings, placing financial and emotional stress on families.
Is long-term care insurance right for you?
Traditional long-term care insurance can help cover these costs, but premiums increase with age. It can get costly to keep up with these growing premiums, but there are alternatives:
- Hybrid Life Insurance with LTC Benefits: A policy offering a death benefit and coverage for long-term care expenses.
- Annuities with LTC Riders: Certain annuities allow policyholders to use funds for long-term care expenses.
If you’re considering a long-term care insurance policy, compare different options and understand what each policy covers before committing to it.
Medicaid and LTC
Medicaid covers long-term care for those with limited income, but eligibility rules vary by state.
With strategic planning in advance, there are methods to help preserve your assets while ensuring you qualify for benefits if needed.
Building healthcare and LTC into your financial plan
If you’re still working and have a high-deductible health plan, contributing to a Health Savings Account (HSA) allows you to save tax-free for future healthcare expenses. HSA funds can be used for qualified medical expenses, including Medicare premiums, even after retirement.
As you look ahead, it’s important to take a realistic view of healthcare costs. While we can’t predict them exactly, they’re likely to be greater than you expect. Remember these principles to consider:
- Use retirement calculators that include healthcare costs.
- Plan for increasing medical expenses in your later years. Studies have shown around 10% of all medical spending is spent in the last year of life.
- Healthcare costs typically rise faster than general inflation.
It’s a good idea to consider incorporating healthcare-related decisions into your estate plan, including:
- Advance healthcare directives (Living wills)
- Medical power of attorney (Healthcare proxy)
- Long-term care preferences
These documents help ensure your wishes are honored, relieving loved ones from making difficult medical decisions during a stressful time.
Action items: Five steps to consider for spring cleaning your healthcare and LTC plan
✅ Review your current coverage and adjust if needed
- Check Medicare, private insurance, or retiree benefits for changes.
- If you want to adjust your health coverage, note the dates for the Annual Enrollment Period and mark them in your calendar, so you’re prepared.
- Consider whether long-term care insurance or alternative funding strategies are necessary.
✅ Consult a Financial Planner
A financial advisor can help integrate healthcare planning into your retirement strategy, helping to ensue your long-term care needs won’t derail your financial goals.
✅ Create or review your advance directives
Work with a professional to draft/review advance healthcare directives that help protect your family from financial stress and tough decisions. File these documents in a safe but easily accessible place.
✅ Have conversations with family
Discussing long-term care preferences with loved ones can help align expectations and avoid future surprises.
✅ Stay informed on policy changes
Healthcare laws and insurance policies change frequently. Keeping up to date can help you maximize benefits and minimize costs.
Disclosure
Advisory services are offered through Sonmore Financial LLC, an Investment Advisor in the State of Arizona. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any funds or stocks in particular, nor should it be construed as a recommendation to purchase or sell a security. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested.
