Risk management is at the core of any sound financial plan. But it takes on heightened importance in retirement. Once you leave the working world, you don’t have the benefit of a regular paycheck. It could be difficult to bounce back from a market downturn or a costly emergency.
Health care costs can be an especially dangerous risk for retirees. Fidelity estimates that the average married couple will spend $275,000 on out-of-pocket health care expenses.1 That figure doesn’t even include long-term care, which can cost thousands of dollars per month and may be needed for several years.
Fortunately, there are steps you can take to reduce your risk exposure and protect your retirement. Below are three such steps to consider. If you haven’t yet developed your retirement risk management strategy, now may be the time to do so.
Review your health care needs and coverage options every year.
Medicare is a valuable resource for retirees. In its original form, it provided coverage for hospitalizations. Over time, however, Medicare has been expanded to cover things like doctor visits, prescription drugs and much more. Different plan options come with different protection levels, as well as varying premiums, deductibles and copays. It may be difficult to know which coverage you should choose.
Fortunately, Medicare lets you change your coverage annually. The program offers an annual open enrollment period. During this time, you can make adjustments to your coverage or even switch to a different plan altogether.
Use these periods to align your coverage with your needs. For instance, early in retirement, you may find that a low-premium, high-deductible plan works well for you. As you get older, you may be willing to pay for more robust protection. The enrollment period gives you the chance to make sure your coverage always meets your needs.
Consider long-term care insurance.
According to the U.S. Department of Health and Human Services, today’s 65-year-olds have a 70 percent chance of needing long-term care at some point in their lives.2 Long-term care is extended assistance with basic living activities, and it’s usually needed because of mobility or cognitive issues.
As you might expect, long-term care can be costly. However, you can use long-term care insurance to cover some or all of the expense. You pay premiums to an insurer, and then the insurer pays your long-term care costs should you ever need assistance. Most policies cover care provided either in a facility or in the home.
If you haven’t yet looked at long-term care insurance, now may be the time to do so. You can choose the coverage, premiums and other options that best fit your needs and budget. A financial professional can help you find the right policy for you.
Hang on to your permanent life insurance.
Do you have permanent life insurance policies that have accumulated cash value? You may be tempted to surrender the policies and use the cash to fund your retirement. Many people purchase life insurance when they’re young and have kids in the home. In retirement, though, life insurance may seem unnecessary.
However, you can use the cash value in the policy to help pay for emergencies. For example, you can take tax-free loan distributions from your policy’s cash value account. The loan has to be repaid, but the tax-free distribution could help you pay for long-term care or medical bills. If you don’t repay the loan before you pass away, the balance is simply deducted from the death benefit.
The life insurance death benefit could also be helpful to your surviving spouse after your death. He or she may face substantial medical and long-term care bills that accumulated during the final years of your life. The life insurance could help your spouse regain his or her financial footing.
Ready to develop your risk management strategy? Let’s talk about it. Contact us today at Safe Retirement Strategies. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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