Retirement may be an exciting period of life to look forward to. But let's face it. There can be a lot of financial unknowns when it comes to retirement.
Will Social Security continue to pay benefits in full? How long will your savings last? And how much money will it cost to function once your career has wrapped up, keeping in mind that we don't know how steeply inflation will rise?
But while all of these are clearly valid concerns, one major fear you might have with regard to retirement is declining health that requires long-term care. In a recent Transamerica survey, 37% of workers expressed this specific fear. So if it's something that's kept you awake at night, you're not alone.
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The good news is that there are steps you can take to cover the cost of long-term care. But you'll need to start taking them well ahead of retirement.
Don't leave your future health needs to chance
One giant myth surrounding long-term care is that Medicare will foot the bill for it. Not so.
Medicare will only cover expenses that are healthcare-related. If you need physical therapy in your home following surgery or an accident, that's something Medicare will generally pick up the tab for. But if you need to be moved to an assisted living facility due to your age, Medicare is most likely going to avoid paying.
That's why you need to take long-term care matters into your own hands and not rely on Medicare. And in that regard, you have options.
One is to apply for long-term care insurance in your 50s. You don't really want to do so sooner than that because then you'll be paying those premiums for a long time. And to be clear, those premiums could get expensive. But they might pale in comparison to the cost of paying for nursing home care or assisted living for several years.
Another way to address your long-term care needs is to consistently contribute money to a health savings account (HSA) if your health insurance plan is compatible with one.
The beauty of HSAs is that you're allowed to carry your money forward as long as you want. You can spend your entire career maxing out an HSA and investing that money so that come retirement, there's a nice pile of cash coming your way. That could serve as a means of paying for a nursing home or assisted living facility should you need to move to one.
Not only can you use money in an HSA to pay for long-term care itself, but you can also use that money to pay the premiums on a long-term care insurance policy. And remember, even if you don't end up needing long-term care, you can generally expect your healthcare costs to rise during retirement. So having money in an HSA is a smart bet either way.
Be prepared
In the absence of a crystal ball, it's hard to predict how your health will shake out and what needs you'll have later in life. But if you don't want to bankrupt yourself or put an undue financial burden on your loved ones in the event of needing long-term care, then you'll need to secure long-term care insurance and make sure you have plenty of money on hand to cover those eventual costs. An HSA is a great bet in that regard, but if your health insurance plan isn't compatible with one, you can always pump more money into your IRA or 401(k) plan instead.
