Steps to healthier retirement living

George E. Diamantis

April 1, 2008

Retirement is the light at the end of the work tunnel. And for most Americans, it's quickly approaching. Have you considered the risks that threaten to derail your plans?

Health care often is the largest expense in retirement. But it's unpredictable and often an afterthought in retirement planning.

But with careful planning, you could live happier – and perhaps stress-free – in your golden years. Here are some steps to take for a healthier retirement:

Start early

Health care costs have risen faster than the rate of inflation over the past 20 years. That means planning for a larger share of your retirement budget to cover health care costs. Many employers do not offer health care benefits after retirement. As a result, you're left seeking medical insurance from private sources and the government.

By 2010, it's estimated nearly a quarter of a retiree's after-tax income will be needed to pay for health care costs – an increase of 50 percent in just a 10-year period, according to the Center for Retirement Research at Boston College. By 2030, that figure jumps to 35 percent.

But what about the gaps in coverage and price increases? That's where careful planning can help.

Cover the costs

Since the majority of Americans can't rely on their employers to provide health care benefits, you'll have to find other options and look to Medicare as a means to shoulder some of the costs. But if you retire before you become eligible for Medicare at 65, you'll be responsible for purchasing personal coverage to cover the gap.

Medicare does a good job insuring the health of America's seniors. But it doesn't cover everything. There are out-of-pocket premiums as well as services outside the plan's scope, such as vision, hearing, dental and podiatric care. Considering most seniors need treatment in these areas, the costs can and likely will add up. So plan ahead and cover the costs.

Prepare for long-term care

As we age, assistance may be needed with basic activities of daily living, such as bathing, dressing and eating. This type of care – regardless of whether it's in-home or at a facility – does not come cheap. Medicare does not cover long-term care, and most of us can't afford to pay for it out of pocket without depleting our retirement nest egg.

Many pre-retirees are opting to buy long-term care insurance (LTCI) policies. Depending on the contract and issuing company, these policies usually begin paying for the costs associated with long-term care once you become unable to independently perform several of the activities of daily living. 

While most people recognize the value of LTCI, often the expense of buying a standalone policy deters them from seeking coverage. Some insurers now offer a long-term care rider that can be attached to a permanent life insurance policy.

If the owner ever requires care, the rider makes it possible to accelerate the death benefit of the insurance contract to pay for qualified costs. For more specific information about long-term care coverage options, contact your financial professional.

Understanding your health care options, potential costs and resources for meeting these expenses can impact dramatically  the quality of care you receive and its financial impact on your budget. Finding the appropriate options to round out your insurance and financial needs will help you have the robust retirement you've been working toward.