Making sure your financial situation still works for you as you get older is an ongoing process. This is true for you and your spouse as well as for your parents and other aging family members.
Here are three financial considerations for seniors when it comes to planning for the future.
Senior housing options
One significant need for many seniors in retirement is housing. It's common for needs to change, and understanding available housing options can help with your long-term planning now.
While seniors may want to stay in their home for the long term, there could come a time in a later stage of retirement where needs change. Downsizing or moving to an assisted living community, for example, are both common for many seniors as they get older.
Consider some common senior housing options:
- Aging in place — This can be the right choice for seniors who love their current home and are independent. Something to consider is what kinds of adjustments might need to be made in the future and the associated costs — for example, making a home wheelchair-friendly.
- Active adult communities — These over 55 communities are very popular if someone wants to downsize but still live in their own home and have a built-in community with nice amenities.
- Independent living communities — These communities can be a good fit for those who are independent and sufficient most of the time, but could use some extra care now and then.
- Assisted living — Like independent living, an assisted living community provides plenty of support. It also includes personal care services to those needing assistance with daily activities, such as bathing or getting dressed.
- Residential care — Residential care is an option for seniors that provides personal care in a home-like setting. These facilities offer long-term, personalized services at varying levels of assistance to smaller groups. This type of living arrangement can be a good choice for seniors who require individual care.
- Nursing home — Nursing homes and other skilled nursing facilities offer advanced, around-the-clock medical care that cannot be provided at home. This type of living arrangement is for those who are ill and need frequent care.
Senior housing costs
Costs can vary widely depending on the type of senior housing you or your loved one will need. It's never too early to start setting aside money for senior housing in retirement.
Typically, staying in your own home is more affordable. However, if there comes a time when help is needed with day-to-day tasks or medical issues arise, it could become more difficult to continue living at home.
On the other hand, assisted living and nursing homes can be expensive, and not typically covered by Medicare. It's important to take this potential need into consideration when planning for long-term care and retirement. Options include long-term care (LTC) insurance or starting a health savings account (HSA), which can help cover out-of-pocket costs, plus it's tax-free when used for qualified medical expenses.
Health care expenses
While some health care costs may be offset by health insurance plans, seniors will pay some out-of-pocket for some health care expenses. In fact, the Centers for Medicare & Medicaid Services estimated that out-of-pocket spending for health care would grow at an average of 4.4% through 2019.1
Here are some basics for seniors to keep in mind when it comes to health care expenses:
- Don't presume that Medicare and Medigap insurance will cover all health care expenses.
- Get familiar with what is and isn't covered under Medicare and Medigap plans to get an idea of not only what type of supplemental insurance may be needed to help fill the gap, but what additional premiums may be required.
- Project future medical/health care needs by reviewing family history. For example, does high blood pressure or heart disease run in the family? What about diabetes?
- Factor in the cost of long-term care services. Remember, Medicare won't pay for non-skilled long-term care services, and Medicaid only pays out if an individual or couple meets specific income and asset criteria.
- Include the cost of health care in retirement plans. A qualified financial professional can help determine how much to set aside and what adjustments should be made to avoid being blindsided by health care costs later.
Life insurance for seniors
According to the U.S. Census, the number of grandparents raising their grandchildren has increased substantially over the past several decades. In fact, 2.7 million grandparents nationwide have taken on the role of primary caregiver for grandchildren under the age of 18.2 An AARP study found that 53% of grandparents are contributing substantially to their grandchildren's educational costs, with another 37% contributing to everyday living expenses, and 23% contributing to medical/dental costs.3
With the right amount of life insurance, seniors can have peace of mind knowing that after they're gone, not only will their children and grandchildren's basic needs be met, but the payout from the death benefit can help pave the way for a future that includes money for college tuition and other expenses.
Seniors should review existing life insurance policies, making sure to update beneficiaries as needed and evaluate needs against the death benefit amount. Seniors who do not have a life insurance policy should explore their options. The death benefit from a life insurance policy could help their loved ones cover their final expenses when they pass away.
Learn more about life insurance for seniors.
1. https://www.cms.gov/Research-Statistics-Data-and-Systems/StatisticsTrends-andReports/NationalHealthExpendData/NationalHealthAccountsProjected
2. https://www.census.gov/content/dam/Census/library/publications/2014/demo/p 20-576.pdf
3. https://www.census.gov/content/dam/Census/library/publications/2014/demo/p 20-576.pdf
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