Retirement planning includes caring for your health
Posted Apr 1, 2014 2:30 AM CDT
By Susan A. Berson
Staying healthy in retirement requires planning. "Typically, health care is the second- or third-largest expenditure for retirees," says Sunit Patel, senior vice president of Fidelity's benefits consulting group, who worked on Fidelity's projections that a 65-year-old couple retiring in 2013 with Medicare coverage, co-payments and deductibles, and out-of-pocket prescription costs would need $220,000 to cover a retirement of 17 to 20 years of medical expenses, excluding long-term care.
Future retirees should budget FOR A 5-6 percent increase, Patel says. "Technology serves to reduce costs in most industries, but for a retiree's health care and retirement savings, technological advances can be a double-edged sword," he says, because "the cure that increases your longevity means you have more years in retirement to fund."
To estimate costs, visit AARP's online calculator, says Jean Setzfand, AARP vice president of financial security. "Click on the health conditions you have for a customized financial estimate of medical expenses you could incur."
In addition to health care costs, plan for long-term care. "At some point you or someone you love will need ... assistance with the daily activities of living," says Bernard A. Krooks, founding partner of Littman Krooks in New York City and past president of the National Academy of Elder Law Attorneys. "I've seen the catastrophic consequences of not planning. A stroke at 52, Alzheimer's at 60; these things ... happen to lawyers, too."
Use a two-step approach. "First, consider what kind of care you want," Krooks says. "Addressing where you will get the care is a huge factor in the financial analysis because that determines cost. Personal savings, paid caregivers, reliance on family, long-term care insurance or a combination ... are among the payment options."
National averages on out-of-pocket expenses for long-term nursing care are about $95,000 per year.
"Sole reliance on savings to pay long-term care expenses is usually unrealistic," says Krooks. "For example, [with] dementia or Alzheimer's, you can live 15-20 years with those ailments needing round-the-clock assistance. "
Assess the intended caregiver's present and future abilities. "Caregiving involves emotional and physical strength," Krooks says. "You have to consider what happens if the intended caregiver gets cancer, or even dies, before the patient does and sufficiently plan for it."
AARP's caregiving resources offer a long-term care expense calculator.
"Longevity insurance is an emerging product," Setzfand says. "It's a deeply deferred annuity." Other hybrid long-term care products provide a pre-set amount for nursing homes, assisted-living facilities and/or in-home health care. Some qualify for tax-deductible premiums.
"Don't count on Medicare or Medicaid," Krooks says. "Medicare pays only if your condition satisfies the skilled-nursing-care threshold for nursing care facility placement for a temporary period of time. For Medicaid, you have to be broke for eligibility," he says.
MAINTAIN THE BRAIN
Boosting your brain health now will save money. "The earlier we start ... a brain-healthy lifestyle, the more successful we will be at building a resilient and vibrant brain capable of staving off Alzheimer's," says Dr. Sandra Bond Chapman, founder and chief director of the Center for BrainHealth at the University of Texas at Dallas. Studies there have shown that preserving cognitive function depends on how one chooses to use and protect the brain.
"The brain is built by how it is used every single day," Chapman says. "The more cognitive power we add to our personally specific cognitive endowment on a regular basis, the more these reserves will help us to protect against cognitive losses."
While legal practice provides cognitive exercise, Chapman says constant mental work depletes the brain. A prescription? Sleep.
Inadequate sleep "puts you in a state that resembles jet lag or even early dementia," she says, "causing memory and concentration problems, and can require at least 10 days to fully recovery. Pulling all-nighters to finish a brief is like a double whammy—depleting benefits and making your brain feel foggy."
Chapman says that if six to eight hours is unrealistic, aim for at least five during your regular sleep cycle.
"If all else fails, even a 30-minute nap can help the brain rebound," she says. "Other supporters of brain health are physical exercise and a heart-healthy diet."
This article originally appeared in the April 2014 issue of the ABA Journal with this headline: "Health Wealth: Retirement planning includes caring for yourself."
Susan A. Berson, an attorney in Leawood, Kan., is the author of several finance and tax books for lawyers. The last of her articles in this series will appear next month, discussing how retirement means refocusing priorities.