Broker Check

A Reality Check about Post-Retirement Healthcare Costs

March 30, 2021

Americans are living longer, and that’s great news. Extended lifespans, however, can also come with added anxiety, as people begin to ask themselves: “Who will take care of me when I’m older? And how will I pay for it?”

As the Baby Boomer generation continues to age, more families are worried about the cost and burden of healthcare, especially in the event long-term care is needed. The uncertainly around long-term care isn’t just limited to those over 80. Experts recommend that post-retirement healthcare planning should begin between the ages of 50 and 60, and for good reason.

Data shows that seven out of 10 people over the age of 60 will experience a long-term care event.1 More individuals are realizing that at some point in their lives, they or someone they love will need long-term care. According to a survey conducted by Northwestern Mutual, 56% of Americans say that saving for long-term care is a top financial priority. Still, a whopping 73% of them haven’t started planning for it yet.


Protecting Retirement Savings

Healthcare costs — in particular long-term care costs — can quickly deplete even the most robust retirement savings. The estimated average lifetime cost of long-term care hovers at around $172,000, and may be much more, depending on the type and length of services needed.3 Government programs like Medicare and Medicaid, and even Medicare supplemental plans, don’t cover the costs for long-term care — forcing many families to dig into their savings.

There are alternatives to paying out of pocket. Health Savings Accounts (HSAs) allow individuals to set money aside on a pre-tax basis to pay for certain medical expenses, making it an attractive way to save for healthcare-related costs that occur after retirement. Importantly, when used to pay for healthcare expenses, these funds are never subject to income tax. What’s more, individuals can use their HSA funds to pay for long-term care premiums.

Which brings us to the second alternative: long-term care insurance. Long-term care insurance policies can help cover the cost of home care, adult day care, assisted living, fulltime nursing home care and memory care that government programs don’t.

Currently, the vast majority of long-term insurance is sold on an individual basis. According to the American Association for Long-Term Insurance, 7.5 million Americans have a long-term care policy — just a small percentage of the almost 100 million Americans who are 55 and older.This isn’t surprising, considering that long-term care policies can be too cost-prohibitive for many individuals. Fortunately, some employers are helping make this type of coverage more affordable by offering group life insurance benefits with long-term care riders. These policies can be a cost-effective way for employer-sponsored benefit plans to provide long-term care coverage to their employees.


Should Your Benefit Plan Offer HSAs and Long-Term Care Policies?

The answer may be “yes.” As the workforce ages, a growing number of plans are introducing strategies to help employees prepare for and minimize the financial impact of post-retirement healthcare costs. These strategies include the addition of HSAs and long-term care insurance as part of the benefits package.

Offering HSAs and long-term care insurance has advantages for employers as well as their staff. As an employer, providing this additional safety net sends a powerful message that your organization cares about the physical, emotional and mental wellbeing of employees and their families — long after their tenure with you has ended. It’s also a unique way to differentiate your organization, and attract as well as retain loyal, engaged employees.


Navigating the Complexities of Long-Term Care

HSAs and long-term insurance are still fairly new territory for most organizations as well as individuals, and navigating the options can be challenging. Businesses and non-profits alike need to determine how much coverage to offer employees, which policies and plans to choose, and whether the policy should go with employees in the event they leave the organization.

It’s also important to make sure your employees understand HSAs and long-term care insurance, the benefits of each, and why it’s smart to start planning for post-retirement healthcare costs sooner rather than later. At StoneKimbro, we can help you and your employees make sense of available options, so you can make an informed decision while supporting your employees’ retirement goals.

The long-term health of your employees plays a critical role in their future as well as yours. Start the conversation around planning for future healthcare needs and costs now. Contact us today.


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