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The Part of Retirement No One Plans For

Everyone (hopefully) plans for retirement. But there’s one part most people don’t even think about.

Take a moment and picture your retirement. You’re probably imagining yourself sleeping in every morning, spending lots of time with your grandchildren, or taking a well-deserved trip to Hawaii. While those are all great ways to spend your golden years, too many people forget to plan for the not-so-fun part of retirement: the increasing risk of health problems.

For a person of advanced age, an injury or illness could be life-changing — and bank-breaking. So take some time to plan for the later stages of retirement long before you reach them. It may not be fun, but it will save you time, money, and headaches in the future.

Estimate your costs

Roughly 81% of people nearing retirement haven’t figured out what healthcare will cost them as they age, according to recent research by Voya Financial. That’s troubling, because the average couple who turned 65 last year can expect to pay about $260,000 during retirement to cover healthcare costs, according to a study by Fidelity. Rising drug costs and expensive hospital visits make up the bulk of those costs, but even a single health issue can be incredibly costly to treat. For instance, the average cost of a hospital stay after a fall is $30,000, and that number only increases with age.

Then there are costs associated with assisted-living facilities or in-home care. Many people can’t afford an assisted-living facility or nursing home. As of 2016, the average daily cost of a private room in a nursing home was $225 (which amounts to $82,125 per year), and in some of the more expensive areas of the country, that number jumps to about $330 per day (or $120,450 per year).

In-home care is less expensive but costs around $160 per day, or about $40,000 per year (assuming the caretaker spends eight hours per day and 22 days per month at the home). Adult day care is also an option, costing roughly $69 per day, or $17,250 per year (again, assuming 22 days per month).

Keep in mind that these costs are in addition to normal, everyday costs that you’ll need to save for during retirement. So if you’d need half a million dollars just to keep up with your pre-retirement standard of living, you may need to add a couple hundred thousand dollars to your savings to account for healthcare costs and living accommodations.

Consider major lifestyle changes

To avoid the rising costs of nursing homes or assisted-living facilities, many retirees rely on family members to care for them in their own homes. But even that can come with some unexpected costs.

Say, for instance, your adult children and grandchildren have agreed to help take care of you, but they’re dispersed all over the country. Will you need to sell your home and move closer to one of them? Will they move to be near you? Could you move in with them if need be? Even if you and your caregiver already live in the same city, you’ll have to consider commute time and whether it would be worthwhile to move to a closer neighborhood.

If you’re planning on moving, that’s a major expense you’ll need to consider when creating your retirement budget — especially if you plan to move to a more expensive area of the country.

If you plan to stay in your own home for the rest of your life, you may need to make adjustments so that your house will meet your future needs. If your home has stairs, for instance, you may need to install a stair lift or convert a lower-level room into a bedroom. Maybe you’ll need to replace the porch steps with a ramp if you use a scooter or wheelchair, and perhaps replacing the slippery hardwood floors with carpeting will be necessary to prevent falls.

While each of these costs may seem minor (at least in comparison to the costs of living in a nursing home), they add up quickly. For example, it can cost anywhere between $2,500 and $5,000 to install a stair lift in your home. Building a ramp to replace porch steps can cost between $3,500 and $8,000. And the average cost to install carpeting in a home hovers around $1,500.

Figure out how you’ll pay for care

After you’ve gotten a better idea of how much healthcare and/or living accommodations will cost you during retirement, it’s time to figure out how to pay for it.

One method is to simply build those costs into your retirement budget. Use a retirement calculator to get a rough estimate of how much you’ll need to cover your basic living expenses, then add another $100,000, $200,000, or however much you think you may need (erring on the side of caution). After that, it’s just a matter of saving as much as you can so that you have a buffer to cover later-stage retirement costs.

However, it won’t be feasible for everyone to save an extra $200,000. In that case, it’s important to be honest with yourself and figure out a backup plan. A couple potential backup plans can include Medicare or long-term care insurance.

Medicare can be incredibly helpful in some situations, but not others. Medicare Part A is available to anyone over the age of 65 who has paid Social Security taxes for at least 10 years, and it covers medically necessary hospital care. Medicare Part B, on the other hand, covers necessary doctor services and preventive care. While Part A doesn’t require a monthly premium, the standard monthly premium for Part B in 2017 is $134. (See this article for more information about Medicare costs.)

Also, Medicare typically doesn’t cover long-term care that isn’t medically necessary. So if you choose to live in a nursing home or hire an in-home caretaker to help you cook meals or run errands for you, Medicare won’t cover it. In this situation, you may consider long-term care insurance.

About 70% of Americans turning 65 this year will require long-term care, according to the U.S. Department of Health and Human Services. But neither Medicare nor private insurers will cover most forms of long-term care. Medicaid can sometimes help, but only in very specific situations. Therefore, long-term care insurance may be necessary if you want to avoid paying out of pocket. Premiums vary and typically cost a few thousand dollars a year, but it may be worth it to avoid paying tens or hundreds of thousands of dollars for long-term care.

Of course, it’s impossible to plan for every expense that may arise during retirement. There will always be unexpected costs that pop up, and you can never plan out every detail of your life. And although thinking about your last few years of retirement may not be fun, it’s crucial that you plan as much as you can so that when that time arrives, you’re financially prepared to take it in stride.

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Drew Limsky

Drew Limsky

Editor-in-Chief

BIOGRAPHY

Drew Limsky joined Lifestyle Media Group in August 2020 as Editor-in-Chief of South Florida Business & Wealth. His first issue of SFBW, October 2020, heralded a reimagined structure, with new content categories and a slew of fresh visual themes. “As sort of a cross between Forbes and Robb Report, with a dash of GQ and Vogue,” Limsky says, “SFBW reflects South Florida’s increasingly sophisticated and dynamic business and cultural landscape.”

Limsky, an avid traveler, swimmer and film buff who holds a law degree and Ph.D. from New York University, likes to say, “I’m a doctor, but I can’t operate—except on your brand.” He wrote his dissertation on the nonfiction work of Joan Didion. Prior to that, Limsky received his B.A. in English, summa cum laude, from Emory University and earned his M.A. in literature at American University in connection with a Masters Scholar Award fellowship.

Limsky came to SFBW at the apex of a storied career in journalism and publishing that includes six previous lead editorial roles, including for some of the world’s best-known brands. He served as global editor-in-chief of Lexus magazine, founding editor-in-chief of custom lifestyle magazines for Cadillac and Holland America Line, and was the founding editor-in-chief of Modern Luxury Interiors South Florida. He also was the executive editor for B2B magazines for Acura and Honda Financial Services, and he served as travel editor for Conde Nast. Magazines under Limsky’s editorship have garnered more than 75 industry awards.

He has also written for many of the country’s top newspapers and magazines, including The New York Times, Washington Post, Los Angeles Times, Miami Herald, Boston Globe, USA Today, Worth, Robb Report, Afar, Time Out New York, National Geographic Traveler, Men’s Journal, Ritz-Carlton, Elite Traveler, Florida Design, Metropolis and Architectural Digest Mexico. His other clients have included Four Seasons, Acqualina Resort & Residences, Yahoo!, American Airlines, Wynn, Douglas Elliman and Corcoran. As an adjunct assistant professor, Limsky has taught journalism, film and creative writing at the City University of New York, Pace University, American University and other colleges.