Retirement reflections dance behind my eyelid. I’m reminded our nation is quickly becoming a nation of retirees, as I slide back into my hammock hung between two ancient pines. The river roars past me making its way south to the Rio Grande. Great rivers form the earth’s circulatory system revealing Mother Earths health and well – being. Rivers also provide us answers to our questions. All too often rivers prompt us to ask better questions. How many of us know how to best protect one’s nest egg during retirement?
Turning on my side I ask my question directly to the river. What are the greatest threats to my nest egg? A hawk returns to the nest with food for her young. Hungry cries echo from high above. The Hawk’s mate circles in a protective flight pattern.
The primary threats to one’s nest egg over the next 30 years are poor investment returns on one’s nest egg, inflation, and health care costs. 10,000 people retire everyday now so now for the first time the ratio of retirees to young workers has begun to flip flop. Instead of 10 workers to one retiree now it is the other way around 10 retirees to one new worker. This will make it tougher to sell one’s nest eggs overtime with decent pricing, and profit.
Inflation is real concern for many retirees living on a fixed income. Too big of topic for this post, please see my previous post Sixty & 6,000 Days – How to Prepare Financially for background on this important topic. I recommend future retirees have a plan in place to reduce energy and food costs by 25% on a monthly basis when warranted. The complimentary online seminar that addresses inflation concerns on my website www.creativeretirementplanning.net is titled “Flexible Frugality.”
Health care costs are the big elephant in the room. Experts cite 200,000 to 300,000 as the out of pocket cost including health care premiums to a retiree. Estimates are as high as 25% of total retirement expenses will be on health care. A January report by the “Insured Retirement Institute said that a healthy 65-year-old male can expect the cost of health care expenses, including premiums, for the rest of his life to total $350,000, and a 65-year-old woman can expect to pay at least $417,000.”
This year, the average annual cost of nursing home care is nearly $76,500, while assisted living facilities cost, on average, about $36,100 per year. This could quickly deplete even a sizeable retirement nest egg. Others, who have fewer assets, will likely rely upon the Medicaid program for their long-term care needs.
The LTC product now provides more comprehensive coverage for additional types of long-term care services, such as home health care, respite care, hospice care, personal care in the home, and services provided in assisted living facilities, adult day care centers and other community facilities.
The benefits of long term care insurance policy are nest egg protection and independence. Retirees are more self – sufficient and don’t need to be dependent on their family or children. They are more likely to be able to stay in their homes longer. They are financially secured and don’t have to be a burden on anyone.
For many retirees with a sizeable nest egg as well as other assets a Long – term Care policy is recommended. The younger one is the cheaper an LTC monthly premium will be.
However before rushing out and getting the cheapest policy one can find a future retiree must really do their homework or due diligence on the company providing you with the policy. Unfortunately this type of insurance policy can be tricky. The representative will be quick to get you to buy without really considering your financial circumstances. The biggest problems you face are you may get priced out of the policy ( premium rate increases) before you can possibly use it or that the insurance company will go bankrupt. The solvency of companies offering long-term care policies assumes they can pay claims for the policies they have sold. Assume nothing. Start with your States Attorney General’s office and work your way down when researching a potential LTC provider.
Most retirees will be successful by saving money (lots of it) and working as long as they can, hanging on to health insurance, and then living comfortably on pensions, social security and or rental property income. Their accumulated savings (nest egg) are such that they will comfortably weather any potential erosion of their buying power over time; perhaps leaving less to their heirs than previously expected.
Staring intently into crystal clear, braided pocket water, I smile, recalling how yesterday I was getting lost in what I love doing. I genuinely enjoy being as busy as I want to be creatively. I’m laser focused on what I am best suited to do fueled by the faith it is all worthwhile no matter what.