Protect Your Retirement with a Plan that Covers Health and Long-term Care

5 minute read

The unvirtuous cycle

Your wealth is your health, according to Virgil. Jump forward a couple of centuries, and this still holds true. However, Americans today know that healthcare is costly, linking to wealth in way Virgil probably never considered. And if you are a woman and/or a person of color age 60+, chronic medical conditions disproportionately affect you. According to a recent study, older women make up two-thirds of those in the top 25% of the population for highest yearly burden when both treatment costs and lost wages are combined. Of those who lost wages due to chronic disease, 56% are older women. At the same time, older women also have the lowest household incomes and the highest out-of-pocket medical expenses. Blacks and Hispanics/Latinos aged 60+ have $4,000 more in average yearly costs due to chronic disease than whites and far lower financial resources to deal with this. And older people of color experience 15% higher average yearly treatment costs than whites because they have a greater number of and/or more costly chronic diseases (Chronic Inequities National Council on Aging 2022).

If you or your loved ones fall into any of these categories, understanding the inextricable link of wealth and health is critical to funding a secure retirement.

WATCH Your Money Map: the latest thinking on health care costs in retirement


Marc Cohen, Co-director of the LeadingAge LTSS Center @UMass Boston, joined Jean Chatzky on Your Money Map to discuss the latest thinking on health care costs in retirement on July 13, 2022.

Aging is expensive

Medicare is often viewed as the healthcare coverage safety net in retirement. You might be surprised, however, to find how much your premiums, co-pays and additional out-of-pocket (OOP) expenses cost. Estimates say a 65-year-old woman retiring today at 65 could spend $184,000 in healthcare costs during her retirement and a 45-year-old woman retiring at 65 could spend as much as $265,000 (Milliman 2020). The other (unpleasant) surprise – long term care (LTC) coverage is NOT a part of Medicare. And LTC services are often needed for one of the other disproportionate chronic care issues facing women and people of color – Alzheimer’s disease.

Almost two-thirds of older Americans with Alzheimer’s dementia are women and, at age 65, women without Alzheimer’s have more than a one in five chance of developing Alzheimer’s dementia during the remainder of their lives, compared with a one in nine chance for men. Many women either have to rely on non-spousal family members or pay for LTC out of their own pockets. Despite their greater risk of needing to pay for LTC, women are less likely than men to own LTC insurance (Retirement Income Institute 2022). One in seven African Americans aged 45 and older have subjective cognitive decline and older African Americans are about two times more likely than older whites to have Alzheimer’s or other dementias. Older Hispanics are about one and one-half times more likely than older whites to have Alzheimer’s or other dementias (Healthy Brain Initiative CDC 2018). Because long term care costs are not covered by Medicare, understanding your projected costs is critical to understanding what you will need in savings to fund these expenses. Genworth’s annual Cost of Care survey provides a way to use your state, city, or zip code to estimate LTC costs. The 2021 national average monthly costs were:

  • Homemaker Services $4,957
  • Home Health Care Aid $5,148
  • Adult Day Care $1,690
  • Assisted Living Facility $4,500
  • Semiprivate Room $7,980
  • Private room $9,034

Fiscal fitness

So, with all of these headwinds, what are some of the things you can do to make sure that you have as few surprises as possible and the financial resilience to fund your healthcare costs? Here are three steps to help you get started:

  1. To know where you are going, you need to know where you are. Analyze your current health care costs and take into consideration that your health may change as you grow older.
  2. List your health goals and care preferences and, most importantly, share them with your family and/or advisor(s). An eldercare attorney can also be a resource to help you understand the legal implications of how you fund your health spending.
  3. Know what financial sources you can draw from to fund these expenses. Purchasing Long Term Care (LTC) insurance is one option. It has two main types of plans: standalone traditional long term care insurance and hybrid asset-based long term care insurance. Also, consider setting up an emergency fund dedicated to your health costs. Segregating investments that remain stable (e.g., U.S. Treasuries) can help you have peace of mind when unexpected bills arrive.

And, if you’re worried about how health costs may impact your retirement income, one of the most effective ways to protect yourself from volatile markets and uncertainty is to add an annuity to your portfolio, which will give you a guaranteed stream of income you can count on each month for the rest of your life. Protected income from an annuity can give you that must-have money to help cover your basic monthly expenses such as a mortgage or rent, utilities, groceries, or transportation, so you have the peace of mind knowing those essential costs are covered. The right financial professional can help you determine which investments meet your needs. “Our analysis also found that poverty among older people of color with chronic diseases ranges from 7 to 16 times higher than whites,” said Marc Cohen, PhD, Co-Director of the LeadingAge LTSS Center @UMass Boston. While inequities like this cannot be solved easily, a plan for how you will fund your retirement healthcare costs is an important first step to avoid financial hardships in your golden years.

Financial Professional questions to determine their expertise on retirement healthcare costs

  • What advice do you offer clients who are concerned about retirement healthcare costs?
  • How do you help clients project their retirement healthcare costs?
  • What percentage of your clients are older women? Married? Single? Divorced? Widowed?
  • How have you helped them make sure they have enough money to last throughout what may be a long retirement?
  • To have a truly diversified portfolio, do you consider including annuities to help your clients with a source of protected income they can count on?
  • How can you help me decide which Medicare program to choose?
  • What types of LTC policies do you offer?
  • How do you help clients with eldercare planning resources?
  • What other resources do you have for eldercare services?
  • Click here for additional questions to ask when interviewing a financial professional

Marc Cohen
Marc A. Cohen, PhD, is co-director of the LeadingAge LTSS Center @UMass Boston. Cohen is a professor of gerontology at the University of Massachusetts Boston and research director at Community Catalyst. Prior to joining UMass Boston, he was chief research and development officer, former president, and co-founder of LifePlans, Inc., a long-term care research and risk-management company. During his 30-year career, Cohen led major research studies related to issues affecting financing and delivery of long-term services and supports, led a national demonstration of a new falls-prevention program sponsored by the U.S. Department of Health and Human Services, and worked with managed care plans implementing new models of care designed to reduce hospital readmissions. Cohen received an MA from the Kennedy School of Government at Harvard University, and a PhD from the Heller School at Brandeis University.

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