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Are You Missing Key Information Affecting Your Financial Security in Retirement?

By Christy Bieber – Jul 29, 2020 at 8:28AM

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A new study suggests that nearly half of Americans are, and doing so is leaving them unprepared for retirement.

When you're making plans for retirement, two of the biggest costs you need to factor in are healthcare expenses and long-term care expenses.

Unfortunately, a recent study shows that nearly half of all Americans are unaware of some of the key ways to defray the costs associated with these two big expenses. If you're one of them, you could be putting your financial security at risk. 

Worried older woman with crossed arms.

Image source: Getty Images.

Americans may be missing out on the chance to protect their retirement security

According to the Center for a Secure Retirement, just 54% of Americans who are in or near retirement are familiar with long-term care insurance, while just 47% report knowing much about Medicare Advantage plans. That's a big problem, as both Medicare Advantage Plans and long-term care insurance could be important tools that prevent you from draining your nest egg too quickly if you get sick. 

Medicare Advantage Plans are an alternative to traditional Medicare. You probably know that Medicare provides health insurance for most Americans over 65, but what you may not be aware of is that there are big coverage gaps and many things Medicare doesn't cover. With traditional Medicare, for example, you won't have vision or dental coverage or coverage for hearing aids, and you could owe big copays and coinsurance costs for routine care. 

Medicare Advantage Plans, on the other hand, offer more options in terms of the coverage you get. You may be able to get a plan that covers some of the expenses Medicare won't pay for, or a plan with lower premiums, low maximum out-of-pocket limits, or lower deductibles. You can shop for a Medicare Advantage Plan during open enrollment and have the flexibility to pick a plan that's right for you rather than just sticking with standard Medicare's one-size-fits-all approach. But you can do that only if you understand what a Medicare Advantage Plan is, why you might want to opt for one, and when you can sign up. Sadly, that means the 53% of Americans who don't know how Medicare Advantage works may be missing out. 

And as for long-term care insurance, it pays for nursing homes and home care that Medicare almost never covers. And since there's as much as a 70% chance you'll need this care, and it can come at a price of more than $100,000 a year, purchasing a policy is definitely worth considering. But you can't do that if you aren't aware of how this insurance works or why you might need it -- and that puts the 46% of Americans who don't know about long-term care insurance in jeopardy.

Don't get caught unprepared for your biggest retirement expenses

Purchasing a Medicare Advantage Plan or buying long-term care insurance may not be the best choice for you. You may decide to use a Medigap policy instead, which is a policy that supplements traditional Medicare instead of replacing it as a Medicare Advantage plan would. Or you may opt to include nursing home planning in your estate plan, so you can get Medicaid to cover your nursing home care by structuring the ownership of your assets so they don't disqualify you from this means-tested government insurance. 

But the bottom line is that if you don't understand how Medicare Advantage Plans or long-term care insurance work, you could be missing out on key opportunities to protect your financial security as a retiree. To make sure that doesn't happen to you, it's worth taking the time to peruse Medicare Advantage plans to see if one is a better fit, as well as to get some quotes for long-term care insurance and see what it might cover for you. 

Whether you're already in retirement or planning ahead for your future, take the time to learn about both today so you can make an informed choice. 

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